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Ideology and the Balanced Scorecard: An Empirical Exploration of the Tension Between Shareholder Value Maximization and Corporate Social Responsibility

Abstract

In a society where the ideology of shareholder value maximization (SVM) prevails, how do evaluators make appraisal and bonus decisions when corporate social responsibility (CSR) measures and financial measures in the balanced scorecard (BSC) point in different directions? To explore this question, we conducted two studies to develop and test a conceptual framework. Participants were asked to evaluate the performance of two managers, using a case we wrote about a commercial bank. We found that (1) evaluators are more willing to drop CSR performance measures than financial measures from the evaluations; (2) perceived CSR relevance is influenced by where evaluators stand in regard to CSR (“stakeholder view” in the “Perceptions of the Role of Ethics and Social Responsibility” or PRESOR scale) and also by where evaluators believe shareholders stand (shareholder support); and (3) there is a financial bias in appraisal and bonus decisions when CSR measures are used in the BSC, consistent with SVM ideology. We conclude by discussing the implications of the influence of SVM ideology on the use of CSR measures in terms of business research, practice, and education.

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Abbreviations

BSC:

Balanced scorecard

CSR:

Corporate social responsibility

PRESOR:

Perceptions of the role of ethics and social responsibility

SPN:

Shareholder primacy norm

SVM:

Shareholder value maximization

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Acknowledgments

The authors wish to thank the editors of JBE's special issue on Ideologies in Markets, Organizations and Business Ethics, and the anonymous reviewers for their helpful comments and suggestions. We also thank the participants in our experiment, particularly the Institute of Management Accountants professionals.

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Correspondence to Regina F. Bento.

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Bento, R.F., Mertins, L. & White, L.F. Ideology and the Balanced Scorecard: An Empirical Exploration of the Tension Between Shareholder Value Maximization and Corporate Social Responsibility. J Bus Ethics 142, 769–789 (2017). https://doi.org/10.1007/s10551-016-3053-6

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Keywords

  • Balanced scorecard
  • Corporate social responsibility
  • Ideology
  • PRESOR
  • Shareholder value maximization
  • Shareholder primacy norm