Political Corporate Social Responsibility (PCSR):

The State-like Role of Business to Address Governance Gap

Dr. Dewan Mahboob Hossain Dr. Ranjan Kumar Mitra FCMA
Associate Professor Associate Professor
Department of Accounting & Information Systems Department of Accounting & Information Systems
University of Dhaka University of Dhaka
[email protected] [email protected]

Dr. Mohammed Mehadi Masud Mazumder FCMA

Associate Professor
Department of Accounting & Information Systems
University of Dhaka
[email protected]

Abstract
This article focuses on a novel idea newly introduced in the domain of Corporate Social Responsibility
(CSR) popularly known as Political Corporate Social Responsibility (PCSR). In today’s globalized world,
business organizations are voluntarily addressing various socio-political concerns and engaging in activities
that previously were considered as the responsibilities of the government such as eradication of poverty,
supply of public goods, protection of environment, and reduction of gender, racial or ethnic inequality. It is
generally perceived that governments of different countries (in particular, developing and underdeveloped
countries) fail to perform these responsibilities in an efficient manner because of ‘governance gap’. As
business organizations have enough resources and money, they can contribute in narrowing the governance
gaps by performing state-like functions. By presenting evidences extracted from CSR or sustainability reports
of few Fortune 500 companies, this paper sheds light on the way these corporations are performing PCSR
and helping the governments to mitigate those gaps.

Keywords: Corporate Social Responsibility, Political Corporate Social Responsibility, Corporate Political
Activity, Governance Gap, Fortune 500.

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1. Introduction attributable to the prevalence of local and global
‘governance gap’ that exists mainly in the developing
The interaction between business and politics has and underdeveloped economies. Consequently,
always been an intriguing issue to the researchers. A businesses can use these PCSR activities to narrow
large number of studies (e.g., Baron, 2003; Detomasi, down ‘governance gap’. Researchers have shown
2008; Getz, 1997; Hillman, Keim, and Schuler, 2004; their interest to explore this new field of research
Lawton, Mcguire, and Rajwani, 2013) have been both conceptually and practically since last decade
conducted exploring the political roles and influence (e.g., Detomasi, 2008; Detomasi, 2015; Frynas and
of business, for instance, how companies use (or Stephens, 2015; Rasche, 2015; Scherer, Rasche,
misuse) their power to guide government policy, Palazzo, and Spicer, 2016; Whelan, 2012).
process and regulation for instrumental reasons The objective of this paper is threefold. First, we try
(i.e.,profit-focused). Such school of thought is widely to shed light on PCSR which is a new dimension of
known as corporate political activity (CPA) (Rasche, Corporate Social Responsibility (CSR). Second, we
2015). An interrelated yet conceptually distinctive make an effort to emphasize how PCSR activities
notion that also emphasizes on the interdependency can be helpful in bridging governance gap. And finally,
between business organizations and government we demonstrate few evidences which highlight how
is political corporate social responsibility (PCSR). the corporations listed in ‘Global Fortune 500’ are
It is a new dimension in the domain of corporate performing PCSR roles in reality.
social responsibility (CSR) where by attempts are
being made to understand the firm’s state-like This study has two implications. First, by
functions such as providing public goods (e.g., health, demonstrating global evidences, we try to highlight
education, etc.), mitigating social problems (e.g., how business firms are contributing to mitigate
poverty alleviation, gender inequality, racial/ethnic the governance gap through PCSR around the
in equality, corruptions, environmental degradation, world. Second, as governance problems are more
etc.), and engaging in formulation of regulations (e.g. acute in the developing nations, we believe that
self-regulation, industry-regulation, global standards PCSR practices of global firms would provide an
and rules). impetus to their counterparts in the developing
nations to increasingly engage themselves in
In the past, it was believed that the only responsibility mitigating governance gaps and achieving sustainable
of business is to make profit (Friedman, 1970). As developments.
such, firms should accept social and environmental
responsibilities if there is a strategic reason to The remaining article is structured as follows. In the
do so. However, because of growing awareness next section the idea of PCSR is discussed in detail.
about the detrimental side-effects of business Subsequently, PCSR is compared and contrasted
activities on social and natural environment, diverse with a seemingly related notion of corporate political
stakeholder groups have created incessant pressure activity (CPA). The fourth section summarizes how
on firms to not only conduct business activities PCSR activities can contribute in bridging governance
in a socially responsible manner but also perform gap. Section five presents some evidences of PCSR
various welfare activities for the greater interest activities from the corporations listed in ‘Global
of a globalized society. There are evidences that Fortune 500’. At the end the conclusion is drawn.
businesses now a days, other than complying social
norms and ethics, are also contributing to social
welfare in various forms in order to legitimize their
2. Corporations as government:
existence in the society. These activities which, in
many ways, are political in nature, were supposed to
A conceptual underpinning of
be the responsibilities of the government in the past.
For example, companies are working for education,
political CSR (PCSR)
health, poverty reduction, women empowerment, PCSR is an emerging concept in the theory and
welfare of racial and ethnic minority, preventing practice of CSR which covers the roles and activities
environmental degradation and others. Evidences of the corporations that have a political dimension.
of this kind of welfare activities gave birth to the It goes beyond the traditional concept of corporate
idea of PCSR. The emergence of PCSR is largely citizenship and includes the corporate activities

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that are traditionally thought as the activities of and Matten, 2007). Thirdly, PCSR helps corporations
the government (Adelopo et al., 2015). It is said to mitigate socio-political risks arising from their
that through PCSR, the corporations go for an industrial activities (Adelopo et al., 2015). In many
‘interventionist role’ or ‘state-like role’ (Adelopo et cases when industrial activities are performed, many
al., 2015; Rasche, 2015;Scherer and Palazzo, 2007). social problems are created. For example, industrial
Frynas and Stephens (2015, p.485) defined PCSR as: activities can result in environmental degradation.
“… activities where CSR has an intended or PCSR can act as a compensatory and reconciling
unintended political impact, or where intended activity in relation to these social problems
or unintended political impacts on CSR exist (i.e., (Adelopo et al., 2015; Mordi et al., 2012; Raimi and
impacts related to the functioning of the state as a Adeleke, 2010). Fourthly, PCSR helps in reducing the
sphere of activity that is distinctive from business prevalent infrastructural deficits of the community
activity)”. where the corporation is operating (Adelopo et
al., 2015). It helps in improving the life standard of
Moon, Crane, and Matter (2005) and Scherer and
the community people and also creates a better
Palazzo (2007) suggest that corporations can help
environment for business. By dealing with the
the formulation and administration of various
issues such as poverty, crime, unemployment and
political structure and goods for the greater
infrastructural deficits, the companies can highlight
interest of a globalized society. Under instrumental
their presence and importance in the community.
argument of CSR, corporations are engaging in social
Also a ‘better’ infrastructure of the community may
activities that are explicitly or implicitly guided by
ensure better business opportunities.
shareholder/stakeholder interests. In contrast, PCSR
emphasizes on expansive political duties of business It can be said that when companies perform PCSR
firms in which they can positively influence the civil, activities, they reach a better position to influence
political and social rights of citizens and communities the governmental agencies (Adelopo et al., 2015).
(Whelan, 2012,) for instance, providing public They can build political and other necessary
goods (e.g., health, education, etc.), mitigating social networks through these activities which helps
problems (e.g., poverty alleviation, gender inequality, them in lobbying and influencing the community in
racial/ethnic inequality, environmental degradation, different ways (Adelopo et al., 2015). Thus, PCSR
etc.), and engaging in formation of regulations (e.g., can be used as a tool for power sourcing (Adelopo
self-regulation, industry-regulation, global standards et al., 2015). Moreover, it can help them to portray
and rules).. themselves as pro-social and thus impression
management becomes easier.
Adelopo et al. (2015) highlighted four reasons for
which corporations engage in PCSR activities.
Firstly, the effect of globalization may pressurize the 3. Differences and similarities
corporations to go for PCSR activities. As because
of globalization the MNCs have to operate beyond
their own regions, they have to make an attempt
between CPAand PCSR
European and American scholars have taken two
to transform the ‘private attitude, morals, practices
different perspectives to study the interrelationship
and institutions’ (Donaldson, 2010, p.728) of those
between business firms and government. In the CSR
areas. PCSR helps to establish the ‘presence and
literature, European approach is known as PCSR
influence’ of the MNCs in those regions (Adelopo
while American approach is referred to as CPA.
et al., 2015). Secondly, these days it is considered
Both the concept ‘CPA’ and ‘PCSR’ build on the
that ‘governance’ has become a complex process
interaction and/or interdependence of corporations
that should have the inclusiveness of both state
and politics/government. However, the CPA
and non-state actors (Adelopo et al., 2015). There
literature views business-government connections
should be an interaction and cooperation among
from ‘a managerial point of view’ whereby the
state, civil society and corporations (Adelopo
firms would like to maximize their self-interest by
et al., 2015; Whelan, 2012). As a partner in the
‘lobbying policy makers’, ‘forming coalitions’, and
governance process corporations have to assist
‘making contributions to political campaigns’(Rasche,
government to make the economic growth and
2015, p.5). Through strong connection with the
development possible (Adelopo et al., 2015; Gond

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government, firms would like to protect themselves they act voluntarily to influence forthcoming
from external regulatory threats and exploit various regulation in their favor, the regulatory regime can
political favors (e.g., favorable tax policy, relaxed move towards harder form of law. Nevertheless,
acts and regulation, gaining easy access to public CPA and PCSR can complement each other directly
resource, winning public contracts). Alternatively, or indirectly, and firms can use both to perform
the proponents of PCSR acknowledge the limits their responsibilities towards society (Rasche, 2015).
of such economic view which is often denoted as
a ‘purely instrumental view of corporate politics’
(Scherer & Palazzo, 2011, p. 900). Instead they 4. PCSR as a tool to reduce
presume an altruistic view to propose that firms
become politically active to reduce governance gap ‘governance gap’
which may exist because of lack of resources of the Authors such as Adelopo et al. (2015) and Whelan
national state to ensure good governance. (2016) highlighted that PCSR can be used as a tool
Rasche (2015) presents another argument that the to reduce ‘governance gap’ mainly in developing
European and American perspective of political and underdeveloped economies. In general,
involvement of business firms differs with respect governance gaps are created because of poor level
to the context or setting in which firms engage of commitment and strategic planning (Faleg, 2013).
in political activities. The context refers to the According to Faleg (2013, p.2):
distinct political environment of the EU and USA. “A governance gap can be defined as a situation
The European Union’s strategy on CSR adopts a in which the actors (member states, institutional
multi-stakeholder perspective. Therefore, European bodies) have not been conferred or are reluctant to
approach to PCSR, from its origin, rests on collective assume the authority to shape the rules of the game
effort where businesses along with government, civil and set strategic priorities”.
society and other affected parties act jointly to find Governance gap in developing or underdeveloped
solutions to social and environmental problems. economies is a common phenomenon. Many of
On the other hand, American approach to study these economies are suffering from governance
the relationship between business and government related problems such as lack of resources, lack of
assumes that firms implement political activities in commitment from government, corruption, poor
those settings where policy issues of interest to them strategic planning and others. Lack of governance
can be addressed. The political environment of USA helps several social problems to sustain for a long
can be characterized by a strong culture of political period.
lobbying, donations and campaign contributions
by corporations and other actors whereby CPA is According to Nelson (2008), three types of
viewed as a premeditated attempt of corporations governance gaps (bad, weak and indifferent) can
to influence government policy and regulation that exist in different economies. Firstly, there may exist
support or promote their own strategic objectives. ‘bad governance’ where the governments are not
generally accountable and act in a repressive manner
Despite conceptual differences, the divergence towards its citizens (Nelson, 2008). In those cases,
between theoretical assumptions of PCSR and lack of transparency and corruption prevails at a high
empirical corporate behavior suggests that this twin level. Secondly, there can be ‘weak governance’ where
concept of political role of business has similarities, the governments lack necessary administrative and
at least, in two respects (Rasche, 2015). Firstly, institutional capabilities and resources to fulfill
although PCSR literature rejects instrumental the needs of the citizens (Nelson, 2008). Thirdly,
reasons for political engagement, practical evidences there may exist ‘indifferent governance’. In this
suggest that many firms consider business case as an situation the governments, even after having enough
incentive to participate in governance arrangement. resources, get influenced by several interest groups
Secondly, both CPA and PCSR have a common and cannot prioritize the more important social
interest to deter stringent government regulation. and economic needs of the citizens (Nelson, 2008).
PCSR literature seems to reject such proposition These governance gaps work as obstacles in the
at a first glance but real corporate behavior implies way of social and economic development. Many
that firms may engage in PCSR fearing that unless giant MNCs operating in different parts of the

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world, through their PCSR activities, attempt to in China, including Xinjiang, Tibet, Qinghai, Henan,
address local citizen’s basic needs that remained and Jiangxi, benefiting more than 100 million people."
unattended because of these governance gaps. In (China National Petroleum Corporation, Corporate
this way PCSR activities help the companies provide Social Responsibility Report, 2015, p. 49). [Authors’
necessary support to the government and achieve emphasis]
government’s goals. By actively participating in the In this example, the company has highlighted several
socio-economic development process, business sectors (infrastructural development, education
firms develop a relationship with the government and and health) where they have contributed and tried
become development partners of the government. to participate in the governance process. Now
In addition, firms sometimes encourage states to we present some examples where the companies
establish more robust standards of business conduct reported on specific PCSR issues. In the following
to plug the regulatory vacuum (Whelan , 2012). example, the company mentioned about its CSR
Like Nelson (2008), Rasche (2015) also mentions activities related to women empowerment:
about three dimensions of global governance "We have also been working to help U.S. women
gaps. Firstly, ‘knowledge gap’ which means lack of from low income households improve their
knowledge regarding the nature, magnitude and employment skills. The Walmart Foundation
solution to a number of global problems (e.g., climate provided support and training for more than
change). Secondly, ‘normative gap’ which means 200,000 since the launch of our Global Women’s
lack of consensus among countries to form global Economic Empowerment Initiative. Some of this
norms to be followed by all. Finally, ‘institutional work has been accomplished through programs
gap’ which means lack of authority and resources aimed at the retail sector, such as our funding of
to any institutions (e.g., the United Nations) to the Chicago Cook County Workforce Partnerships.
enforce existing norms and policies (e.g., human This work to enhance economic mobility in retail
rights). Business firms are increasing playing active is particularly important to women, since over 50
role to mitigate these gaps by collaborating with civil percent of retail workers in the U.S. are women."
society, state actors and international organizations, (Walmart, Global Responsibility Report 2016, p. 36).
and thus assuming a political role (Rasche, 2015). [Authors’ emphasis]
In the given text, the company mentioned that some
5. Evidences of PCSR households in the society come from lower end
of income distribution. The company, by imparting
activities of some Fortune training to female members of such family, is trying to
improve their employability and financial condition.
500 companies Thus, the company is dealing with poverty and
women’s empowerment simultaneously. The issues
In this part we present few evidences of PCSR
which generally are expected to be handled by the
activities from the CSR or corporate sustainability
government are looked after by the company in this
report of few Global Fortune 500 companies.
case. Thus, the company is bridging the governance
These examples illustrate the PCSR activities of
gap. The following is another example where
these giant global companies in relation to poverty
the company is focusing on women’s economic
alleviation, entrepreneurship development, women
empowerment and women entrepreneurship in
empowerment, healthcare services and education
developing countries.
facilities.
"A large number of women in Indonesia and
The first example is taken from the CSR report of
Tanzania do not have access to banking and other
China National Petroleum Corporation where the
financial services, live long distances from a bank
company points out several developmental initiatives
branch or are deterred by burdensome bank fees
that they have taken in China:
and administrative requirements. This program,
"In 2015, we continued to implement over 20 which runs through the end of 2016, will test the
projects, including infrastructure reconstruction, theory that women entrepreneurs and farmers
education & training, and healthcare in over 20 with access to basic banking and insurance
provinces (municipalities and autonomous regions) services through mobile telephones will be able

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to save more, invest their increased savings in The company clearly highlighted the governance gap
their businesses and see increased income from by mentioning about poverty stricken regions in the
those businesses. To streamline program efforts, country. The problem of poverty and malnutrition
TechnoServe and Mercy Corps are simultaneously got emphasized in this statement. By introducing
providing mobile savings access and financial charity meals program, the company is trying to
literacy training to 3,000 women farmers mitigate this social problem. The following statement
and entrepreneurs in Indonesia and Tanzania. also contains information about the same company’s
"(Exxon Mobil, Corporate Citizenship Report, 2015, effort on ensuring nutrition. The company is
p. 67).[Authors’ emphasis] mentioning about its activity on nutrition education:
It is clearly mentioned here that the women of these "In 2015, Walmart and the Walmart Foundation
nations do not have much access to banking and they contributed $14.9 million to nutrition education
do not have much training to become entrepreneurs. efforts, for a total of $24.9 million since the
This is a result of governance gap. In this statement program was announced. In the last year alone, our
the company has highlighted its efforts to bridge investment helped bring better nutrition tools and
this gap. The following statement emphasized on the tips to nearly 970,000 people. Since we initiated
activities of the company towards the poor people our commitment in 2014, nearly 1.9 million people
in the society: have been reached." (Walmart, Global Responsibility
"In 2016, the partnership focused on creating jobs Report 2016, p. 95).
and promoting entrepreneurship to strengthen The following statement also contains evidences
local economies. In Myanmar, for example, we related to health issues such as women and
worked with Mercy Corps to increase incomes and children’s health and treatment of malaria in Angola.
the resilience of households in Rakhine State, one The company is trying to mitigate the governance
of the nation’s poorest areas. We trained 1,782 gap in the health sector of the country:
vegetable farmers from households in 32 villages "For 11 years, ExxonMobil has supported Africare,
to improve their agricultural practices. We also an NGO committed to finding solutions for health
provided access to advice and new technologies challenges, through its community-based malaria
to an additional 1,399 commercial farmers." (Royal projects in Angola. This year, Exxon Mobil helped
Dutch Shell, Sustainability Report 2016, p. 59). Africare scale up its community-based malaria
[Authors’ emphasis]. intervention program in Quipungo, Angola. This
The company is highlighting that there are poor project focuses on the control and treatment of
people in the society, and it is trying to improve malaria for children and pregnant women with the
their situation by promoting entrepreneurship, following goals:
creating jobs, training farmers and giving them • Ensuring 85 percent of pregnant women and
access to better infrastructure (new technologies). children under the age of five sleep under long-
Thus the company is bridging governance gap by lasting, insecticide-treated bed nets;
providing several necessary facilities (that are not
• 85 percent of pregnant women and children
adequately provided by the government) to the local
under the age of five receive appropriate malaria
people and is contributing to social and economic
treatment within 24 hours of exhibiting symptoms;
development. In the following statement also the
company highlighted its activities targeted to poor • 85 percent of pregnant women receive two doses
section of the society: of malaria prophylaxis; and
"In collaboration with China Foundation for Poverty • Local nurses are trained in malaria prevention,
Alleviation and Tencent Charity, Walmart China management and treatment." (Exxon Mobil,
mobilized suppliers, customers and associates to Corporate Citizenship Report, 2015, p. 69). [Authors’
donate to a local charitable meals program, raising emphasis].
awareness and helping provide nutritious meals "In the following two statements, the companies
to schoolchildren in poverty stricken regions." are providing information about their activities in
(Walmart, Global Responsibility Report 2016, p. relation to the education sector.
131). [Authors’ emphasis]
In 2015, ExxonMobil continued to support the Alaska

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Native Science and Engineering Program (ANSEP) program, businesses are providing public goods,
through a two week middle school academy engaging in community services, contributing in
program designed to help students learn and mitigating environmental problems, and performing
complete Algebra I curricula. During the middle social welfare services which were once deemed
school academy, participating students in grades five to be the responsibilities of the government.
through eight explore engineering and science career Because of growing involvement of business in
options and complete a hands-on activity designed political activities, the scholars around the world
to help prepare them for post-secondary STEM have started to view the relationship of business
curricula. As a result of the program, more than and government through the lens of CSR leading
75 percent of ANSEP students complete Algebra to the emergence of a new perspective known as
I by the end of the eighth grade, compared with PCSR. The idea of PCSR is closely related to but
just 26 percent of students nationwide." (Exxon conceptually different from CPA which is also
Mobil, Corporate Citizenship Report, 2015, p. 66). used to study the interdependence of business
[Authors’ emphasis]. and government. The underlying motive of CPA is
"Education changes life and we are willing to to serve self-interest while PCSR seeks to address
promote such changes. CNPC is dedicated to
supporting education, as "giving children a good
education is an important task in poverty relief, and
also a crucial means to stop poverty being passed
on between generations." We invest in domestic PCSR is a new dimension
education, through providing scholarships and in the domain of
subsidies, and funding the construction of
primary schools, etc. In 2015, we granted RMB corporate social
3.99 million through the CNPC Scholarships to responsibility (CSR) where
635 students from 13 colleges and universities in
China. From 2011 to 2015, the CNPC Scholarship
by attempts are being
has helped 3,175 undergraduates and graduates made to understand
in 13 colleges and universities. The total granted the firm’s state-like
scholarships have amounted to RMB 19.95 million."
(China National Petroleum Corporation, Corporate functions such as
Social Responsibility Report, 2015, p. 50). [Authors’ providing public goods
emphasis].
(e.g., health, education,
In the first statement the company is highlighting its
academic program targeted to school students to etc.), mitigating social
teach mathematics. It also claimed that the success problems (e.g., poverty
rate of its program is higher than the average
alleviation, gender
nationwide success rate. In the second example,
the company is highlighting its contribution to the inequality, racial/ethnic
education sector in the form of building school and in equality, corruptions,
giving scholarships and financial assistance to the
students. By performing such activities, the company environmental
is bridging gaps in the governance of education degradation, etc.), and
sector.
engaging in formulation

6. Conclusion of regulations (e.g. self-

regulation, industry-
Faced with increasing media attention and
stakeholder’s pressure, business firms have been regulation, global
accepting and discharging certain responsibilities
standards and rules).
towards society for a long period. As part of CSR

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ISSN 1817-5090,VOLUME-46, NUMBER-05, SEPTEMBER-OCTOBER 2018