A Conceptual Framework for Environmental Analysis

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Academy of Management Review 1979, Vol. 4, No. 1, 63-74.

A

Conceptual Framework for Environmental of Analysis

Social Issues and Evaluation Business Response Patterns

of

S. PRAKASHSETHI

University of Texas - Dallas A conceptual framework is developed to analyze and evaluate business response patterns under different temporal and sociocultural conditions. Corporate responses are classified along three dimensions: corporate behavior or social obligation, social responsibility, and social responsiveness. The contextual component (external environment) is analyzed by dividing the elapsed time between the emergence of a problem and its ultimate solution into four categories: the preproblem stage, the problem identification stage, the remedy and relief stage, and the prevention stage. Examples of current application of the framework and directions for future research are indicated. Business institutions in the United States and other industrially advanced countries have suffered a marked loss in social credibility. While business institutions justifiably take credit for tremendous strides made in living standards, they are accused of causing a host of environment-related and sociopolitical problems and of being insensitive to societal needs. Considerable pressure is put on business institutions to improve their management of social issues, and many institutions, especially large corporations, have taken steps to deal with a variety of social issues. The types of issues that business should tackle and the adequacy of their responses have spawned a whole new field of study, grouped under the rubric of business and society. However, a relative lack of development of a conceptual and analytical framework has hampered a systematic study of comparison and evaluation of corporate social responses and the environmental conditions that lead to the success or failure of specific responses to societal problems (12, 18). This article attempts to develop an analytical

framework to facilitate comparisons of business institutions and of the nature of business responses to social pressures under varying situational contexts and environmental conditions.

The Framework The analytical framework proposed here is classificatory. The classes are broadly defined because both the types of issues covered and the environmental context within which they must be analyzed are so complex. Socio-cultural and political phenomena, involving interactions among human beings and social institutions, are difficultto analyze in precise quantitative terms. Arbitraryprecisions in the definition of variables is just as likely to conceal valuable information as to elucidate. A showing of causal relationships among variables so defined may be erroneous, since the underlying variables are interdependent. One should be wary of words that simplify when the reality they are presumed to describe is complex. Precision, under these cir-

? 1979 by the Academy of Management 0363-7425

63

cumstances, tends to force one intofixed positions which are intellectuallydifficultto defend and emotionallydifficultto withdrawfrom.Thus,a framework that attempts to develop a broad classificatory scheme is the only approach both feasible and of some practicalvalue.

generalized external conditionscreated by a multitude of acts by varioussocial actorsthatare essentiallysimilarwithina given temporaland contextual frame. This approach enables us to determinea logical and therefore acceptable externalcriterionagainst which a corporation'sperformancecan be measured in a societal context. Thus it becomes an

The Social Contextof CorporatePerformance

important complement to research and writingdealing with the issue of the measurement of corporate social performance generally treated under the somewhat misleading title of "corporate social audit" (1,4, 6, 7, 9, 13, 14,20).

An evaluation of corporate performanceor the performanceof any other social institutionmust be to a large extent culturallyand temporallydetermined. A specific action is more or less socially responsible only withinthe frameworkof time, environment,and the natureof the partiesinvolved.The same activity may be considered socially responsible at one time, under one set of circumstances, and in one culture, and socially irresponsibleat another time. No system for evaluatingcorporate social performancecan thereforeignorethe cultural and sociopolitical environment, and the criteria used must necessarily be general and flexible(23). Nevertheless, a classificatoryscheme must have at least the followingtwo properties if we are to make valid cross-culturalcomparisons: (a) stable classifications and (b) stable meanings. The categories for classifying corporateactivitiesshould be stable so thatwhilethe natureof those activitiesand public expectations may change, the scheme should be able to accommodate them to make historical comparisons. The definitions of various classes should be such that they can be applied across firms,industries,and social systems. The frameworkdeveloped herein meets these criteriaand suggests a rationaleby whichcorporate activities can be analyzed in terms of social relevance so that comparisons over time and across industries and nations are possible. The framework consists of two sets of components. The firstdeals with categorization of the types of corporate responses. These are defined not in terms of specific activities, but in terms of types of underlyingrationale applied in respondingto social pressures. The second component deals withthe definitionof the external environment or the context withinwhich the corporate response is being made and evaluated. The emphasis is not on the specifics of a particularsocial situation or problem, but on the

Dimensions of Corporate Social Performance Business responds to two kinds of social forces; market and nonmarket. In the case of market forces, a firm adapts by varying its product, service, promotion, and price mix to meet changing consumer needs and expectations. Adequacy of response can be measured in terms of profitability and growth of the firm. All market actions have some nonmarket or indirect consequences for the society. These second-order effects are generally termed externalities (e.g., pollution) and have traditionally been borne by society as a whole. There have been increasing societal pressures in every industrialized nation for business to minimize the second-order effects of its activities and also to take a more active part and assume greater responsibility for correcting the social ills that inevi-

tably do occur. It is the business response to the nonmarket forces, commonly termed social responsibility and social responsiveness of business, thatis the focus of our inquiry.

Corporations, like all other social institutions, are an integral part of a society and must depend on it for their existence, continuity and growth. They therefore constantly strive to pattern their activities so that they are in congruence with the goals of the overall social system. It would improve our understanding of the situation if we were to analyze the logic of business actions in terms of the role of business in society. Business is a social institution and therefore must depend on society's acceptance of its role and ac-

64

iiii

i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

ulationof that environment- physical,social, and political- to make it more receptive to corporate

tivities if it is to survive and grow. Atany given time, there is likely to be a gap between business performance and societal expectations caused by certain business actions or changing expectations. A continuously widening gap will cause business to lose its legitimacyand willthreatenits survival.Business must therefore strive to narrowthis "legitimacy" gap to claim its share of society's physical and human resources and to maintainmaximum discretionary control over its internal decisionmaking and external dealings (15). The quest for legitimacy by the corporationand doubts by its critics about the legitimacyof some of its actions are at the core of the entire controversypertainingto the concept of corporatesocial performance. One way to evaluate corporate social performance is to use the yardstickof legitimacy.Given that both corporationsand theircriticsseek to narrow the gap between corporate performanceand societal expectations, the social relevance and validityof any corporateactiondepends on one's concept of legitimacy.Viewed inthis respect, corporate behavior can be described as a three-stage phenomenon based on the changing notion of legitimacy from very narrowto very broad. Legitimazation involves the types of corporateactivitiesas well as: the process of internaldecision making;the perception of the externalenvironment;the manip-

activities; and the nature of accountability to other institutions in the system. The corporate behavior thus determined can be defined as social obligation, social responsibility, or social responsiveness (15). Corporate Behavior as Social Obligation First, corporate behavior in response to market forces or legal constraints is defined as social obligation. The criteria for legitimacy in this arena are economic and legal only. Milton Friedman (8) and Henry Manne (10) believe that a corporation is a special-purpose institution and that it leaves this arena at its own risk. The legitimacy criteria are met by the corporation through its ability to compete for resources in the marketplace and through conduct-

ing its operations withinthe legal constraintsim-

posed by the social system. This simplistic argument hides much more than it explains. Competition for resources is not an adequate criterion. Corporations constantly strive to free themselves from the discipline of the market through increase in size, diversification, and generation of consumer loyalty by advertising and other means of persuasion. But even in an ideal situation,

Table 1. Business Strategies for Narrowing the Legitimacy Gap Business

Performance

Legitimacy Gap

Societal

Expectations

1. Does not change performance, but changes public perception of business performancethrough education and information. 2. If changes in public perception are not possible, change the symbols used to describe business performance, thereby making it congruent with public perception. Note that no change in actual performance is called for. 3. Attempt to change societal expectations

of business performance through education and information.

4. In case strategies 1 through 3 are unsuccessful in completely bridgingthe legitimacy gap, bringabout changes in business performance, thereby closely matching it with society's expectations. i

65

smokestacks or paying immediate and faircompensation to victims of pollution or product-related injuries. The issue in terms of social responsiveness is not how corporations should respond to social pressures, but what their long-run role in a dynamic social system should be. The corporation here is expected to anticipate the changes that may be a result of the corporation's current activities, or they may be due to the emergence of social problems in which corporations must play an important role. Again, while social responsibility related activities are prescriptive in nature, activities related to social responsiveness are proactive, i.e., anticipatory and preventive in nature. Table 2 summarizes dimensions and attributes of corporate behavior under the three stages. These dimensions are not intended to be inclusive, but are indicative of the type of analysis that this framework makes possible. Additional categories can be developed relating to specific activities in which a business is engaged. Such an approach may indeed be desirable when this framework is to be applied to evaluate the behavior of specific companies and industries.

the ethics of the marketplace provide only one kind of legitimacy, which nations have been known to reject in times of national crisis or for activities deemed vital to the nation's well-being. Nor can the legality of an act be used as a criterion. Norms in a social system are developed from a voluntary consensus among various groups. Under these conditions, laws tend to codify socially accepted behavior and seldom lead social change. The traditional economic and legal criteria are necessary but not sufficient conditions of corporate legitimacy. The corporation that flouts them will not survive, even the mere satisfaction of these criteria does not ensure its continued existence. Corporate Behavior as Social Responsibility Second, most of the conflicts between large corporations and various social institutions during the last two decades or so in the United States and other industrialized nations of the free world fall into the category of social responsibility. Although relatively few corporations have been accused of violating the laws of their nations, they have been increasingly criticized for failing to meet societal expectations and to adapt their behavior to changing social norms. Thus, social responsibility implies bringing corporate behavior up to a level where it is in congruence with currently prevailing social norms, values, and performance expectations. Social responsibility does not require a radical departure from normal patterns of corporate activities or behavior. It is simply a step ahead - before the new societal expectations are codified into legal requirements. While the concept of social obligation is proscriptive in nature, the concept of social responsibility is prescriptive.

The ExternalEnvironment We must also develop a schema to distinguish among the various external environments - physical, economic, and sociopolitical - within which a given corporate response to a set of social problems must be evaluated. This has been accomplished by dividing the elapsed time between the emergence of a problem and its solution and ultimate elimination into four categories or stages: (a) preproblem, (b) identification, (c) remedy and relief, and (d) prevention. There is some overlap because social problems do not fall neatly into discrete groups, nor can they always be solved in distinct successive steps. However, the arrangement facilitates our analysis of environmental conditions and the adequacy of various corporate responses.

Corporate Behavior as Social Responsiveness The third stage of the adaptation of corporate behavior to social needs is in terms of social responsiveness. The process of adaptation is only partially served if corporations confine changes in behavior to those concerns that emanate from their actions in the marketplace - those related to their business activities. Examples of such behavior are installing devices to remove pollutants from factory

The Preproblem Stage In the process of manufacturing and marketing, business firms are constantly engaged in a series of transactions with individuals and social groups. 66

Table 2. A Three-Stage Schema for Classifying Corporate Behavior

DimensionsofBehaviotage of Behavior Dimensions

One: Social Obligation

Stage pThree s Responsiveness AntSocial

Anticipatory and Preventive

Search forlegitimacy

Confines legitimacyto legal and economic criteriaonly;does not violate laws; equates profitable operations withfulfillingsocial expectations.

Accepts the realityof limited relevance of legal and market criteriaof legitimacyin actual practice.Willingto considerand accept broader- extralegal and extra market- criteriafor measuringcorporateperformance and social role.

Ethicalnorms

Considers business value managers expected to behave accordingto theirown ethical standards.

Takes definitestand on issues of Defines normsin community relatedterms, i.e., good corporate publicconcern;advocates citizen. Avoidstakingmoralstand institutionalethicalnormseven on issues whichmay harmits thoughthey may seem detrimental to its immediateeconomic interest economic interestsor go against prevailingsocial norms(majority or prevailingsocial norms. views).

Social accountabilityforcorporate actions

Construes narrowlyas limitedto stockholders;jealouslyguardsits prerogativesagainstoutsiders.

Individualmanagers responsible not only fortheirown ethical standards butalso forthe collectivityof corporation. Construes narrowlyforlegal purposes, butbroadenedto includegroups affectedby its actions; managementmore outwardlooking.

Willingto account forits actionsto other groups, even those not directlyaffected by its actions.

Operatingstrategy

Exploitativeand defensive adaptation.Maximum externalizationof costs.

Reactive adaptation.Where identifiable,internalizepreviously externalcosts. Maintaincurrent standards of physicaland social environment.Compensatevictims of pollutionand other corporate-relatedactivitieseven in the absence of clearlyestablished legal grounds. Develop industry-widestandards.

Proactiveadaptation.Takes lead in developing and adaptingnew technologyforenvironmental protectors.Evaluatesside effects of corporateactions and eliminatesthem priorto the action being taken. Anticipatesfuture social changes and develops internalstructuresto cope with them.

Accepts its role as definedby the social system and therefore subjectto change; recognizes importanceof profitable operationsbut includesother criteria.

__

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Table 2. (Continued)

Dimensionsof Behavior

Stage One: Social Obligation Proscriptive

Stage Two:Social Responsibility Prescriptive

Stage Three: Social Responsiveness Anticipatoryand and Preventive Preventive Anticipatory

Response to social pressures

Maintainslow publicprofile,but,if atatacked,uses PR methodsto upgradeits publicimage;denies any deficiencies;blames public dissatisfactionon ignoranceor failureto understandcorporate functions;discloses information only where legallyrequired.

Accepts responsibilityforsolving currentproblems;willadmit deficiencies in formerpractices and attemptto persuade public that its currentpracticesmeet social norms;attitudetoward criticsconciliatory;freer informationdisclosuresthanstate one.

Willinglydiscusses activitieswith outside groups;makes information freelyavailableto public;accepts formaland informalinputsfrom outside groupsindecisionmaking. Is willingto be publiclyevaluated forits variousactivities.

Activitiespertainingto governmentalactions

Stronglyresists any regulationof its activitiesexcept when it needs help to protectits marketposition; avoids contact;resists any demands forinformationbeyond that legallyrequired.

Preserves managementdiscretion in corporatedecisions, but cooperates withgovernmentin research to improveindustrywide standards;participatesin political processes and encourages employees to do likewise.

Openlycommunicateswith government;assists in enforcing existing laws and developing evaluationsof business practices; objects publiclyto governmental activitiesthatitfeels are detrimentalto the publicgood.

Legislativeand politicalactivities

Seeks to maintainstatus quo; activelyopposes laws thatwould internalizeany previously externalizedcosts; seeks to keep lobbyingactivitiessecret.

Willingto workwithoutsidegroups forgood environmentallaws; concedes need forchange insome status quo laws; less secrecy in lobbyingthanstate one.

Avoidsmeddlingin politicsand does not pursuespecial interest laws; assists legislativebodies in developingbetterlaws where relevant;promoteshonesty and openness in governmentand in its own lobbyingactivities.

Philanthropy

Contributesonly when direct benefitto itclearlyshown; otherwise,views contributionsas responsibilityof individual employees.

Contributesto noncontroversial and established causes; matches employee contributions.

Activitiesof state two,plus support and contributionsto new, controversialgroupswhose needs itsees as unfulfilledand increasinglyimportant.

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These transactions have certain direct and indirect adverse effects on the parties involved. The first type pertains to the normal leakages and shortfalls found in any manufacturing activity and is unavoidable. The second type of negative side-effect pertains to actions by individual firms to cut corners in product quality, service, or manufacturing processes either under competitive pressures or to increase short-run profits. Taken individually, each incident is not significant in terms of its impact either on the corporation or the affected party. However, when similar acts are performed by a large number of companies and continued over a long period, their cumulative effect is substantial. When that happens, a problem is born. The elapsed time at the preproblem stage is probably the longest of all the four steps, although there is a tendency for the time span to become narrower with increasing industrialization. Most individuals and institutions respond to the problem passively. Their efforts are aimed at adaptation, and the problem is treated as given. Elevation to the problem identification stage varies with different cultures and is based on the relative sociopolitical strength of the affecting and affected groups, the availability of necessary expertise to various groups, the relative size of the affected area relative to total area and population, the existence of mass communication systems in the society, and the access to media by various groups.

given source was the major contributorto the problem. Second, a given adverse effect can be caused by a variety of sources or factors, and direct linkages are therefore impossible to establish. An example is cigarette smoking and lung cancer. Despite overwhelming statistical evidence, tobacco companies in the United States maintain that no direct causeand-effect relationship has been established between smoking and cancer (17). A third difficulty arises when no adequate definitive proof is possible because the symptoms appear years later - e.g., cancer caused in workers in manufacturing processes using asbestos fiber (5) or polyvinyl chloride (24). A fourth difficultydeals with situations in which irreparable damage has been done by the time proof is available, and no corrective or preventive measures are possible - e.g., the use of fluorocarbons in aerosol sprays and their impact on the ozone layer of the stratosphere (25). The definition of the problem may also involve the vested interest or value-orientation of a particular group. Thus conservationists may bemoan the logging of virgin redwoods and call it a national calamity, whereas local communities and loggers may want to preserve their jobs and may therefore resist the establishment of a redwood national park. What is a problem to one group may appear to be an obstruction to another (16). The Remedy and Relief Stage

The Identification Stage

Once a causal linkage has been established, the question of compensatory and/or punitive damages to the affected parties must be considered. This stage is marked by intense activity by the various parties to the conflict, with many questions involved. One is the determination of the injured parties and the extent of their damage. A second question has to do with the assumption of responsibility for payment of claims - the company and the insurance carrier. An equally important third issue is the role played by courts, legislatures and executive and administrative agencies of the government. Certain interrelated issues must be considered. For example, is it socially desirable to make companies pay all the costs of a particulartype of pollu-

Once the impact of a problem has become significant enough, there is a drive among the affected groups to define it, identify its causes, and relate itto the source. This is one of the most difficultstages in the whole process. First, the business entity could not have known of the problem because technology for its detection did not exist. Therefore, the most responsible businesses following the best safety procedures will be found years later to have polluted the environment, exposed their workers to rare forms of cancer, or sold potentially dangerous products. In most cases, direct linkages between cause and effect are all but impossible to find. The best that can be accomplished is to show through inference and statistical weight of evidence that a 69

harmful to the development of socially equitable and technologically feasible long-term solutions as the tendency among some business people to resist every demand for change as not technically feasible, expensive, or unnecessary.

tion not intentionally created? If a particular business or industry is forced to pay the total cost, how will this affect workers, stockholders, and lenders whose livelihood and life savings may be dependent on the profitabilityof that business or industry? The effect of the health of a particular industry on the total economy is also important in considering who should pay for the damages. Thus, government sometimes may be called upon to subsidize payments regardless of which party is at fault. An example is the United States government subsidies to support pension payments to coal miners who had contracted black lung disease during a particular time perod.

Applyingthe Framework The analytical model described above can be used both to understand better how social conflicts develop and how firms respond to predict the effectiveness of particular corporate response patterns to different stages of conflict resolution. In this section, the application of the framework is demonstrated in analyzing a major social conflict involving the operations of large corporations in less developed countries. The conflict had to do with the sale of infant formula foods, and the analysis was carried out by Sethi and Post (19). Two other studies have applied this framework in comparing the responses of the United States and Japanese business corporations to societal pressures in their respective countries (18) and in analyzing the performance of regulatory agencies in the United States (21).

The Prevention Stage At this point the problem has achieved a level of maturity. The causal sources are either well established or easily identifiable. The attempt now is to develop long-range programs to prevent the recurrence of the problem. These include development of substitute materials, product redesign, restructuring organizations and decision-making processes, public education, and emergence of new special-interest groups to bring about necessary political and legislative changes. Itshould be noted that the prevention stage is not sequential, but generally overlaps with the problem identification and remedy and relief stages. The prevention stage, in order to be successful, calls for two changes: a qualitative change in the value sets of business and government, and a modification of the social arrangements among various groups in the social system. This stage is marked by uncertainty and difficulty in making an accurate appraisal of potential costs and benefits. The strategies to be pursued by society would, of necessity, involve unproved technologies and unfamiliar sociopolitical arrangements. Thus, it is not uncommon to find a high degree of self-righteousness in the pronouncements of various groups, which may be long on rhetoricbut short on substance. Groups tend to advocate solutions that favor their particular viewpoint while understating the potential costs to those groups having opposing viewpoints. The ideological anti-business bias of certain groups at this stage could be as

The Situational Context: Evolution of the Infant Formula Controversy The first criticism of the industry and its promotional activities can be traced to the late 1960s when Dr. Jelliffe, Director of the Caribbean Food and Nutrition Institute in Jamaica, conducted research studies. His findings and criticism culminated in an international conference of experts in Bogota, Colombia in 1970, under the auspices of the U.N.'s Protein Calories Advisory Group (PAG), and a follow-up session in Singapore in 1972. The PAG issued an official statement (PAG Statement #23) in 1973 recommending that breastfeeding be supported and promoted in LDCs and that commercial promotion be restrained, industry and/or LDC governments. The first public identificationof the issue occurred in 1973 with the appearance of several articles about the problem in The New Internationalist (22). This, in turn, spurred Mike Muller to undertake a series of interviews and observations which were eventually published in 1974 as a pamphlet titled The Baby Killer(11) with a German translation pub70

and Nestle each sent representatives to these meetings as did a numberof British,European,and Japanese companies. For most companies, this seemed to marka decision pointbetween the social obligation phase and the social responsibility phase. Only a few firms, notably Abbott (Ross), moved to an approachthat includedsteps to mitigate their negative impact in the LDCs. For AHP (Wyeth), Borden, Nestle, and others, this did not occur until1974 when firstplans were occurringfor the formationof an internationaltradeorganization. InNovember, 1975, representativesof nine MNC manufacturersmet in Zurich,Switzerland,and decided to form an internationalcouncil to be known as the InternationalCouncilInfantFood Industries (ICIFI).Nestle, AHP (Wyeth), and Abbott (Ross) participatedinthese discussions along withseveral European and four Japanese companies. Others, such as Borden and BristolMyers sent representatives to the sessions, but chose not to participate actively or join the council. ICIFIurged its members to adopt a code of marketingethics, requir ing the members to recognize the primacy of breastfeeding in all of theirproductinformationand to eliminate in-hospitalpromotionand solicitation by personnel who were paidon a sales commission basis. For those companies that joined, it appears to have markeda passage intothe social responsi bility phase where efforts were undertakento miti gate negative social impacts. There was criticismof the ICIFIcode from the beginning, and Abbott (Ross) withdrewfrom the organization,arguingthat the code was too weak. The company then adopted its own more restrictive code which included a provision prohibitingconsumer oriented mass advertising.Additionalcriticisms have led to some incrementalchanges which have strengthened the "professional"characterof sales activity,but which have not yet proscribedall consumer oriented mass advertising;indeed, the critics continue to charge that the response at the user level has been insufficient.As a publicissue matures, companies may adopt actions which operate to preventfurthergrowthinthe legitimacygap by minimizingor eliminatingthe underlyingsources

lished in Switzerland under the title, Nestle' Totet Kinder (Nestle Kills Babies). Nestle's lawsuit against the public action group that published the pamphlet produced a period of intense advocacy surrounding the trial in the Swiss courts. Thus, between 1974 and mid-1976 when the case was decided, the issue received considerable international

media coverage. Institutionalizedpressures began in earnest in 1975 when shareholder resolutions were filed for consideration at the annual meetings of the American infantformulacompanies. This pressure has continued, and several institutionalinvestors (universities, the Rockefeller and Ford Foundations) have taken positions questioning the responsiveness of the firmsto the controversy.Churchgroups,

through the Interfaith Council on Corporate Responsibility of the National Council of Churches, have led the fight to coordinate the shareholders' campaigns. Most recently, some public interest groups have launched a campaign to boycott Nestle products in the United States. At the LDC level, the government of Papua New Guinea recently passed a law declaring baby bottles, nipples, and pacifiers health hazards and their sale restricted through prescription only. The objective was to discourage indiscriminate promotion, sale, and consumption of infant food formulas (2). The preproblem stage of the infant formula case existed prior to the 1970s. During this time, the adverse impacts on LDCs were not yet articulated. By the early 1970s, the identification stage had been reached, as professional criticism grew and articles and stories began to appear in the mass media. The remedy and relief stage seems to have begun in 1975, primarily through the Nestle trial in Switzerland and the shareholder resolutions filed in the United States. The life cycle of the controversy has not yet reached the preventive stage. The Nature of Corporate Response The MNC's response during the preproblem stage was of the social obligation type, responding only to prevailing law and market condition. The principal industry effort during the problem identification stage was participation in the conference sponsored by PAG. Abbott (Ross), AHO (Wyeth),

of criticism (prevention stage). In 1977, Abbott (Ross) announced its intention to commit nearly $100,000 to a breast feeding campaign in devloping 71

nations, budgeted $175,000 for independent research on breastfeeding, infant formula, and LDCs, and announced a plan for a continuing cooperative

(Ross) Laboratories'attemptto act in ways thatwill create positive impacts in LDCsthereby signals a

shift to a social responsivenessstage. Granting

effortto reviewthe situationwithits critics.ICIFIhas

that there is some danger of sending "doublesignals"to its sales force, the companyseems to have adopted a posture that willpermitit to sell its prod-

also begun working informally with international health agencies to prepare educational materials for use in LDCs and is supporting scientific research about breast feeding, infant formula products, and LDC environments. Borden has also moved from the social obligation to social responsibility stage. The company did not have shareholder resolutions filed with it until 1977.

ucts in appropriate circumstances, while assisting the LDCs to encourage breastfeeding where that is most appropriate. Table 3 describes the patterns of responses from social obligation to social responsiveness as the evolution of the controversy moves from the preproblem to prevention stage.

The filingseems to have facilitateda management review of promotionalstrategies in LDCs. Abbott

Table 3. Socio-Political Dimensions of Infant Formula Foods Controversy: Patterns of Industry Responses (5 MNCs) Stages of Conflict Evolution

Patterns of Industry Response

Social Oblication (Do what is required by law)

Social Responsibility (Mitigate Negative impacts)

PreProblem Stage (Pre-1970)

Bristol-Myers (Mead Johnson Div.) Borden NestleAmerican Home Products (Wyeth Lab.) Abbott (Ross Lab.)

Identification Stage (1970)

Remedy & Relief Stage (1976)

Prevention Stage (1977-)

Bristol-Myers (Mead Johnson Div.) Borden NestleAmerican Home Products (Wyeth Lab.)

Bristol-Myers (Mead Johnson Div.) Borden

Bristol-Myers (Mead Johnson Div.)

Abbott (Ross Lab.)

NestleAmerican Home Products (Wyeth Lab.)

Borden NestleAmerican Home Products (Wyeth Lab.)

Abbott (Ross Lab.)

Abbott (Ross Lab.)

Social Responsiveness (Promote positive change)

72

ronment on corporate structure and internal decision making. Studies are also under way that apply this framework to a comparative analysis of children's television programming and advertising in different countries (3) and social performance evaluation of specific regulatory agencies in the United States (21).

Conclusion The framework developed here has been shown to have wide applicability in analyzing social systems within and between nations. My current research is designed to further elaborate the framework to study the interaction between external envi-

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22. "The Baby Food Controversy."The New Internationalist, August, 1973, p. 10. 23. Votaw, Dow, and S. PrakashSethi (Eds.). The Corporate Dilemma:TraditionalValues VersusContemporarySocial Problems (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1973), pp. 9-45, 167-91. 24. Weaver, Paul H. "Onthe Hornsof the VinylChlorideDilemma,"FortuneOctober,1974, pp. 150. 25. "WhyAerosols Are UnderAttack,"Business Week,February 17, 1975, pp. 50-51.

S. Prakash Sethi is Professor of InternationalBusiness and Business and Social Policy and Directorof the Centerfor Research in Business and Social Policy,School of Management, The Universityof Texas at Dallas. Received 10/12/77

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