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«Investigating Instrumental Corporate Social Responsibility through the Mafia Metaphor Jean-Pascal Gond, Guido Palazzo & Kunal Basu Research Paper ...»

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No. 48-2007 ICCSR Research Paper Series – ISSN 1479-5124

Investigating Instrumental Corporate Social

Responsibility through the Mafia Metaphor

Jean-Pascal Gond, Guido Palazzo & Kunal Basu

Research Paper Series

International Centre for Corporate Social Responsibility

ISSN 1479-5124

Editor: Jean-Pascal Gond

International Centre for Corporate Social Responsibility

Nottingham University Business School

Nottingham University

Jubilee Campus

Wollaton Road

Nottingham NG8 1BB

United Kingdom Tel: +44 (0) 115 951 4781 Fax: +44 (0) 115 84 68074 Email: jean-pascal.gond@nottingham.ac.uk http://www.nottingham.ac.uk/business/ICCSR Investigating Instrumental Corporate Social Responsibility through the Mafia Metaphor Jean-Pascal GOND Guido PALAZZO Kunal BASU Abstract The purpose of this paper is to critically evaluate the instrumental perspective on corporate social responsibility by relying on sociological analyses of a well known organization: the Sicilian Mafia. Legal businesses might share features of the Mafia, such as the propensity to exploit a governance vacuum in society, a strong culture that demarcates the inside from the outside, and an extreme form of the profit motive.

Instrumental CSR has the power to accelerate a firm’s transition to Mafia status through its own pathologies. Lessons for future CSR research are derived, with specific emphasis on understanding a firm’s social embeddedness, acknowledging limitations in regulating corporate behaviour in the global economy, and most critically, the risk of viewing CSR simply as a means rather than as an end.

Key-words Corporate Social Responsibility, Instrumentality, Sicilian Mafia, Stakeholder Management, Metaphor Paper presented at the European Group for Organization Studies (EGOS) Conference, Vienna, Austria, July 5-7, 2007.

Addresses for Correspondence Jean-Pascal GOND ICCSR – University of Nottingham Nottingham University Business School Jubilee Campus, Wollaton Road Nottingham, NG8 1BB, United Kingdom Tel: +44 115 846 6976 Fax: +44 115 8468074 Email: jean-pascal.gond@nottingham.ac.uk Guido PALAZZO HEC Lausanne Switzerland Ecole des HEC Université de Lausanne CH-1015 Dorigny, BFSH1 Email: guido.palazzo@unil.ch Kunal BASU Said Business School University of Oxford Egrove Park, Oxford OX1 5NY United Kingdom Tel: +44 1865 422717 Fax: +44 1865 422501 Email: kunal.basu@sbs.ox.ac.uk Introduction The purpose of this paper is to critically evaluate the instrumental perspective on Corporate Social Responsibility (CSR), relying on sociological analyses of a well known organization: the Sicilian Mafia. As postulated by Friedman (1962), an instrumentalist view of CSR justifies socially responsible behaviours solely on economic grounds, that is, considers such to be appropriate only when their underlying motivation is the attainment of superior financial performance (see Vogel, 2005). Focussing on strategic manoeuvring and the use of appropriate marketing tools, instrumental CSR is synonymous with profit maximization (Garriga & Melé, 2004), and seen to be gaining currency under the current climate of corporate scrutiny (e.g. Lee & Kotler, 2005;

Maignan & Ferrell, 2003; McWilliams & Siegel, 2001; McWilliams, Wright & Siegel, 2006; Porter & Kramer, 2002, 2006).

Corrupt organizations that collapse in financial scandals or multinationals that are notorious for systematic violations of human rights or collaboration with repressive regimes might be viewed similarly to organizations such as the Mafia. Indeed, as argued by Gerber (2000), there is no fundamental distinction between organized crime and organizational crime. Instead, a very thin borderline separates the normal behaviours of illegal and immoral organizations (such as the Mafia) and the illegal and immoral behaviours of normal and legitimate business firms. Further, in the extreme, adoption of an instrumentalist view of CSR could even qualify certain activities of the Mafia as being socially responsible. A corrupt but legal firm and the Mafia might be seen as quite similar, sharing an extreme profit motive with significant overlaps in organizational cultures. The metaphor of the Mafia might in fact highlight potential moral pathologies that are embedded in mainstream economic theory and management behaviours (see Ferraro, Pfeffer & Sutton, 2005; Ghoshal, 2005; Pfeffer, 2005).

Further, as the example of Enron demonstrates, the status of a corporation could change from “most admired” to “most despised”, thereby rendering possible the metamorphosis of a business firm into a Mafia in terms of its intrinsic character.

Current discussions on the new Russian Robber Barons show that such a metamorphosis might occur even in the reverse (Rawlinson, 2002), whereby a despised firm comes to be admired in society.

The Mafia has mainly been portrayed as evil in the management literature or as the extreme antithesis of an ethical organization. For instance, Husted (1998) invokes the Mafia in evaluating the ethical constraints of trust, whereas Gallager and Goodstein (2002: 439) or Wood, MacDermott and Swan (2002) refer to it in describing the limitations of certain business practices such as partnerships. However, such references avoid a full analysis of the Mafia in organizational terms and succeed in reducing it to utter irrelevance (e.g., Colle & Gonella, 2002; Wood et al., 2002). In contrast to the above, we suggest analysing the Mafia, both as a metaphor and as a particular organizational form, investigating the Sicilian Mafia in particular to draw inferences regarding socially responsible behaviour. Following Gambetta (1993), one might consider the Mafia as a ‘business’ dealing in a very specific commodity: the protection of people. In societies with inadequate governance and/or a low level of mutual trust (e.g., underdeveloped or emerging economies characterized by ‘weak states’), both parties involved in a market transaction might opt for mafia protection as guarantee, investing it thus with the role of a profit making intermediary. Gambetta’s (1993) analysis clearly highlights the economic and managerial mechanisms underlying the Mafia’s functioning and its relevance to known forms of business behaviours.

In addition to invoking the Mafia metaphor (Morgan, 1980) to capture certain dimensions of modern corporations and their actions related to social responsibility, our analysis might also point at weaknesses inherent in the functionalist and positivist strain of CSR research (Scherer & Palazzo, 2007). Not only does the latter, culminating in an instrumentalist view of CSR, parrot the limited logic of economic theory, it might by the same token even enshrine the Mafia as a socially responsible organization.

The aim of the paper is to outline some the potential pathologies of instrumental CSR by linking together two streams of research: the sociological and historical analysis of the Sicilian Mafia (relying primarily on the work of Diego Gambetta, 1993, as well as the recent literature on organized and organizational crime) to contemporary discourse on the nature and value of instrumental forms of Corporate Social Responsibility (e.g.

Kotler and Lee, 2005; McWilliams et al., 2006; critically: Vogel, 2005).

The paper is organized as follows: first, we parallel Mafia and business corporations to demonstrate that the former could serve as a powerful metaphor to analyze corporate deviances as well as describe an organizational type that a corporation might metamorphose into under given contexts. These premises are next explored to reveal shortcomings of instrumental CSR. Finally, we discuss some key lessons that could be learned from analyzing the Mafia for purposes of enriching organizational research on CSR.

The Mafia and the Corporation: Paralleling Two Organizational Forms Metaphor: The Sicilian Mafia as a Business Firm Morgan (1980) suggests the use of metaphors in investigating ‘taken-for-granted’ hypotheses or to question theoretical assumptions. He argues that an effective metaphor is one that links two phenomena that are perceived as somewhat overlapping but with significant differences between them (Morgan, 1980: 612). Thus, the Mafia appears to be a potentially powerful metaphor for a business firm: it shares the profit motive with a corporation, but differs from it in many respects such as the use of violence and systematic illegality.

Studying the Mafia’s social organization in parts of Sicily – namely the Cosa Nostra – as it had existed over several centuries, Gambetta (1993) has adopted the lens of economic analysis in describing its essential character and the typical contexts within which it operates most successfully. The latter are characterized by mutually observed low-trust expectations – as in the famous case of the ‘market for lemons’ described by Akerlof (1970) where the buyer fails to ascertain the quality of the car he/she wishes to purchase while the seller remains sceptical of receiving the payment reflecting the true quality of the car. Consequently, both the buyer and the seller might agree to pay a third party to guarantee the transaction, provided the added cost is lower than the potential transaction loss expected by both parties. By paying such a premium, both the buyer and the seller signal their respective credibility and benefit from the transaction, although its potential value to both sides remains lower than one that could be expected in a situation of perfect information and perfect trust. The viability of the Mafia is thus directly related to the ‘demand for protection’ and the Mafia could be viewed from an economic perspective as the ‘supplier of protection’. Gambetta (1993:17) explains that the Mafia could best be understood as a profit maximizing corporation acting on the market of private protection (see also the recent analysis of the Camorra organization by Saviano, 2006) and concludes that “the main market for Mafia service is to be found in unstable transactions in which trust is scarce and fragile.

Such in the case, for instance, with illegal transaction in which no legitimate enforcement agency – in other words, the state – is available”.

It follows then, that the development of mafia-type activities is more likely where state authorities have failed to enforce rules protecting property rights. Such a situation might emerge when a nation or a region switches from one political regime to another, for example, one that was characterized by feudalism (with a small number of owners) or socialism to one where private capital becomes a key element of the economic order (e.g., the transition of Russia from its Soviet past to its capitalist present) leading to an increase in the demand for protection. Following Gambetta one might argue that the Mafia operates in weak governance contexts in which it replaces the third party enforcement power of the state to a certain degree through private and limited delivery of protection.

As a business organization that operates in the market for private protection, the Mafia requires and has developed its own corporate culture with specific rules and discernible forms of behaviour. According to Gambetta (1993) the most important Mafia rule is the Omertà which prescribes absolute silence that insiders must observe with respect to outsiders. Mentioning even the name of the organization to outsiders is strictly forbidden. The effective enforcement of Omertà on its members allows the Mafia to blur its public presence. The power of the Mafia organization is thus built upon a knowledge imbalance: the Mafia itself systematically gathers information on relevant outsiders, while remaining shrouded in secrecy. The Omertà and the contributing knowledge imbalance create a strong corporate culture with a clear view of the inside and the outside. The outside, including all non-Mafia actors, is reduced simply to a means for achieving the organization’s objectives. The Mafia can be understood as the extreme form of organizational self-referentiality, intentionally strengthened by the use of quasi-religious rituals during the initiation ceremony (Falcone, 1991). The

consequence, of course, of such an organizational self-referentiality is its social disembeddedness described by John Dewey in his metaphor of the robber band:

The robber band cannot interact flexibly with other groups; it can act only through isolating itself. It must prevent the operation of all interests save those which circumscribe it in its separateness (Dewey, 1954: 148).

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