Skip to main content
SpringerLink
Log in

The Icelandic Banking Crisis: A Reason to Rethink CSR?

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

In the fall of 2008, the three largest banks in Iceland collapsed, with severe and lasting consequences for the Icelandic economy. This article discusses the ‘Icelandic banking crisis’ in relation to the notion of corporate social responsibility (CSR). It explores some conceptual arguments for the position that the Icelandic banking crisis illustrates the broad problem of the indeterminacy of the scope and content of the duties that CSR is supposed to address. In particular, it is suggested that the way the banks in question conceived of CSR, i.e. largely in terms of strategic philanthropy, was gravely inadequate. It concludes by proposing that the case of the Icelandic banking crisis gives us a reason to rethink CSR.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. The SIC published its findings on April 12th 2010 (http://rna.althingi.is/). The commission’s mandate was to ‘collect information, find facts and provide an overview of the main events leading to the fall of the Icelandic banks and identify its causes’ (Iceland.org 2010).

  2. For an excellent overview see e.g. Hagen 2009.

  3. Consequently, any attempt to reduce the debate over CSR to a manageable set of premises and presuppositions for the purpose of a single essay leaves itself wide-open to critics voicing concerns about over-simplification, reductionism and the like.

  4. Rawls, of course, had ‘individuals’—not companies—in mind when he formulated this distinction (ibid). Nevertheless, leaving aside the philosophically complex question of ‘corporate moral agency’ (see e.g. Ronnegard 2006 for a comprehensive analysis), it shall be assumed here that the notions of positive and negative duties proposed here apply to companies (or at least the executives acting on their behalf) in the context of CSR.

  5. See also McAleer 2003 for this distinction.

  6. The same has been said about the diverse and contradictory ways in which stakeholder theory has been debated. See e.g. Donaldson and Preston (1995).

  7. There are valid practical reasons for this lack of specification of the content of CSR. A major one is that since CSR is voluntary, in the sense that companies take it upon themselves whether or not to formulate and enact some CSR policy or another, it may be feared by the proponents of CSR that too specific an account of what types of duties CSR entails will for many companies pose a barrier to entry onto the CSR bandwagon. It is clearly more appealing to companies and industry-specific organisations to engage in CSR activity if they can themselves cherry-pick the duties or commitments to society they deem appropriate. This raises the question whether society is better off with as many actors as possible pursuing any which ad hoc policy of social responsibility they see fit in the name of CSR, or fewer actors earnestly trying to live up to a more specifically (and narrowly) defined concept of corporate social responsibility.

  8. See e.g. Porter and Kramer 2006; Hamel 2007

  9. It has also been argued that CSR can be seen as an obstacle to creation of a democratic society in as much as it pacifies and placates citizens who otherwise might challenge the structural status quo and demand systemic change (Kuhn and Deetz 2009).

  10. Corporate citizenship a term often understood similarly to CSR, not least in the context of PR.

  11. See also Bae and Cameron 2006.

  12. Exact dating of this particular crisis is debatable. First, some of the contributing processes, such as shrinking global supply of credit, were already in motion in 2007, and second, the duration of the impact of the crisis varies greatly across different economies. But 2008 is the year that the banking systems of America, Europe (including that of Iceland) and elsewhere were shaken to their core by the domino-effect started by the bankruptcy of Lehman Brothers.

  13. These are Landsbanki, Kaupthing (now rebranded as Arion bank) and Glitnir bank. Glitnir bank was previously known as Islandsbanki but rebranded as Glitnir bank in 2006. It was then rebranded again as Islandsbanki following its collapse and subsequent take-over by the Icelandic government in 2008.

  14. This cursory overview of the Icelandic banks´ CSR policies is intended merely to give examples of what types social issues they were concerned with and types of activities they undertook in the name of CSR in the years leading up to their collapse.

  15. A claim the foundation of which can be questioned in hindsight given that the bank was de facto bankrupt three years later.

  16. The last sentence here is repeated in the bank´s 2007 Annual report (Kaupthing Bank 2007, p. 100).

  17. The WGE delivered its report to the Parliament on April 12th 2010 as part of the SIC report, referred to above.

  18. In February of 2007 US$ 1 equalled approximately IKR 67; in February of 2011 US$ 1 equalled approximately IKR 116.

Abbreviations

CBI:

Central Bank of Iceland

CSR:

Corporate Social Responsibility

IFSA:

Icelandic Financial Supervisory Authority

GDP:

Gross Domestic Product

NGO:

Non-Governmental Organisation

PR:

Public Relations

SIC:

Special Investigation Commission

WGE:

Working Group on Ethics

References

  • Argandoña, A. (2006). From ethical responsibility to corporate social responsibility. Presented at the International Symposium on Catholic Social Thought and Management Education “The Good Company. Catholic Social Thought and Corporate Social Responsibility in Dialogue” Rome, 5–7 Oct 2006.

  • Árnason, V. (2010). Moral analysis of an economic collapse—an exercise in practical ethics. Etikk i Praksis—Nordic Journal of Applied ethics, 4(1), 101–123.

    Google Scholar 

  • Árnason, V., Nordal, S., & Ástgeirsdóttir, K. (2010). Morality and operational practices. Report of the Special Investigation Commission (Vol. 8). Reykjavik: Althingi—The Icelandic Parliament.

  • Bae, J., & Cameron, G. T. (2006). Conditioning effect of prior reputation on perception of corporate giving. Public Relations Review, 32(2), 144–150.

    Article  Google Scholar 

  • Bibler, J. (2010). Hversu stórt var fall íslensku bankanna á heimsmælikvarða? Nokkrar tölur (E. How big was the collapse of the Icelandic banks in a global context?). Accessed 12 Dec 2010, from http://www.fme.is/lisalib/getfile.aspx?itemid=7135.

  • Broomhill, R. (2007). Corporate social responsibility: Key issues and debates. Dunstan Paper No. 1/2007, 1–59. Don Dunstan Foundation for the Dunstan Papers Series, ISSN 1833–3613.

  • Burchell, J., & Cook, J. (2006). Confronting the “corporate citizen”: Shaping the discourse of corporate social responsibility. International Journal of Sociology and Social Policy, 26(3), 121–137.

    Article  Google Scholar 

  • Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4(4), 497–505.

    Google Scholar 

  • Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, (July/August), 39–48.

  • Carroll, A. B. (2009). A history of corporate social responsibility: Concepts and practices. In A. Crane, A. McWilliams, D. Matten, J. Moon, & D. S. Siegel (Eds.), The oxford handbook of corporate social responsibility. Oxford: Oxford University Press.

    Google Scholar 

  • Crane, A., McWilliams, A., Matten, D., Moon, J., & Siegel, D. (2009). The corporate social responsibility agenda. In A. Crane, A. McWilliams, D. Matten, J. Moon, & D. S. Siegel (Eds.), The oxford handbook of corporate social responsibility. Oxford: Oxford University Press.

    Google Scholar 

  • Devinney, T. (2009). Is the socially responsible corporation a myth? The good, the bad, and the ugly of corporate social responsibility. Academy of Management Perspectives, May 2009.

  • Donaldson, T., & Preston, L. (1995). The stakeholder theory of the modern corporation: Concepts, evidence and implications. Academy of Management Review, 20, 65–91.

    Google Scholar 

  • French, P. A. (1984). Collective and corporate responsibility. New York: Columbia University Press.

    Google Scholar 

  • French, P. A. (1994). Responsibility and the moral role of corporate entities. In T. Donaldson & R. E. Freeman (Eds.), Business as a humanity. Oxford: Oxford University Press.

    Google Scholar 

  • Garriga, E., & Melé, D. (2004). Corporate social responsibility theories: Mapping the territory. Journal of Business Ethics, 53, 51–71.

    Article  Google Scholar 

  • Hagen, Ø. (2009). Corporate social responsibility—a reader. Working Paper 6-2009. Innovation in Global Maritime Production 2020. Norwegian University of Science and Technology, Trondheim.

  • Hamel, G. (2007). The future of management. Boston: Harvard Business School Publishing.

    Google Scholar 

  • Hooghiemstra, R. (2000). Corporate communication and impression management—new perspectives why companies engage in corporate social reporting. Journal of Business Ethics, 27, 55–68.

    Article  Google Scholar 

  • Hreinsson, P., Bendiktsdóttir, S., & Gunnarsson, T. (2010a). Chapter 2: Summary of the report’s main conclusions. In P. Hreinsson, S. Bendiktsdóttir, & T. Gunnarsson (Eds.), Report of the special investigation commission. Reykjavik: Althingi—The Icelandic Parliament.

  • Hreinsson, P., Bendiktsdóttir, S., & Gunnarsson, T. (2010b). Press conference presentation. Reykjavik, 12 Apr 2010. sic.althingi.is/ppt/KynningEnsku.pptx.

  • Iceland.org. (2010). Special investigation commission mandate. Icelandic government information centre. Accessed 15 Nov 2010, from http://www.iceland.org/info/news/features/nr/6526.

  • Islandsbanki/Glitnir. (2005). Annual report. Supervision and editorial, Islandsbanki.

  • Islandsbanki/Glitnir. (2006). Annual report. Supervision and editorial. Vala Pálsdóttir, Head of Investor Relations, Glitnir.

  • Jännäri, K. (2009). Report on banking regulation and supervision in Iceland: past, present and future. Accessed 5 Feb 2011, from http://eng.forsaetisraduneyti.is/news-and-articles/nr/3581.

  • Kaupthing Bank. (2006). Annual Report. Supervision and editorial, Kaupthing Bank.

  • Kaupthing Bank. (2007). Annual Report. Supervision and editorial, Kaupthing Bank.

  • Keller, K. L., Apéria, T., & Georgson, M. (2008). Strategic brand management—A European perspective. Harlow: Pearson Education Limited.

    Google Scholar 

  • King, A., & Lenox, M. (2000). Industry self-regulation without sanction: The chemical industries’ responsible care program. Academy of Management Journal, 43, 698–716.

    Article  Google Scholar 

  • Kitchin, T. (2003). Corporate social responsibility: A brand explanation. Journal of Brand Management, 10, 312–326.

    Article  Google Scholar 

  • Kolk, A., Van Tulder, R., & Welters, C. (1999). International codes of conduct and corporate social responsibility: Can transnational corporations regulate themselves? Transnational Corporations, 8, 143–180.

    Google Scholar 

  • Kuhn, T., & Deetz, S. (2009). Critical theory and corporate social responsibility: Can/should we get beyond cynical reasoning? In A. Crane, A. McWilliams, D. Matten, J. Moon, & D. S. Siegel (Eds.), The oxford handbook of corporate social responsibility. Oxford: Oxford University Press.

    Google Scholar 

  • Landsbanki. (2007). Annual Report. Supervision and editorial, Landsbanki.

  • Liu, Y., & Zhou, X. (2009). Corporate social responsibility and customer loyalty: A conceptual framework. In G. Ji, J. Chen, Z. Miao, W. Lifen, F. Yang, & P. Li (Eds.), Proceedings of the International Conference on Services Systems and Services Management (pp. 794–798). Xiamen, China: Xiamen University.

    Google Scholar 

  • McAleer, S. (2003). Friedman’s stockholder theory of corporate moral responsibility. Teaching Business Ethics, 7, 437–451.

    Article  Google Scholar 

  • McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1–18.

    Article  Google Scholar 

  • Melé, D. (2009). Corporate social responsibility theories. In A. Crane, A. McWilliams, D. Matten, J. Moon, & D. S. Siegel (Eds.), The oxford handbook of corporate social responsibility. Oxford: Oxford University Press.

    Google Scholar 

  • Pfau, M., Haigh, M. M., Sims, J., & Wigley, S. (2008). The influence of corporate social responsibility campaigns on public opinion. Corporate Reputation Review, 11(2), 145–154.

    Article  Google Scholar 

  • Porter, M. E., & Kramer, M. R. (2006, Dec 2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, HBR Spotlight.

  • Rawls, J. (1971/1999). A Theory of justice—revised edition. Cambridge: The Belknap Press of Harvard University Press.

  • Ronnegard, D. (2006). Corporate moral agency and the role of the corporation in society. Doctoral Dissertation. London School of Economics.

  • Schwartz, M. S., & Carroll, A. B. (2003). Corporate social responsibility: A three-domain approach. Business Ethics Quarterly, 13(4), 503–530.

    Article  Google Scholar 

  • Sethi, S. P. (1975). Dimension of corporate social responsibility. California Management Review, 17(3), 58–64.

    Article  Google Scholar 

  • Steger, U. (2009). Future perspectives of corporate social responsibility: Where are we coming from? Where are we heading? In A. Crane, A. McWilliams, D. Matten, J. Moon, & D. S. Siegel (Eds.), The oxford handbook of corporate social responsibility. Oxford: Oxford University Press.

    Google Scholar 

  • Utting, P. (2005). Rethinking business regulation: From self-regulation to social control. UNRISD Programme Paper TBS-15, Oct 2005.

  • WGE. (2010). Working group on ethics report summary. Reykjavik: Althingi—The Icelandic Parliament. http://sic.althingi.is/pdf/WorkingGroupOnEthics_Summary.pdf.

  • WSJ. (2007, Sep 5). Geothermal Untapped. The wall street journal—special advertising section, B12–B15.

  • Yankee, J. A. (1996). Corporate support of nonprofit organizations. In D. R. Burlingame & D. R. Young (Eds.), Corporate philanthropy at the crossroads (pp. 7–22). Bloomington, IN: Indiana University Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Center for Applied Ethics, Linköping, Sweden

    David Sigurthorsson

Authors
  1. David Sigurthorsson
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to David Sigurthorsson.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Sigurthorsson, D. The Icelandic Banking Crisis: A Reason to Rethink CSR?. J Bus Ethics 111, 147–156 (2012). https://doi.org/10.1007/s10551-012-1207-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-012-1207-8

Keywords

Search

Navigation