Incorporating stakeholder approach in corporate social responsibility (CSR): a case study at multinational corporations (MNCs) in Penang

Wong Lai Cheng and Jamilah Ahmad

Wong Lai Cheng is Post Graduate Student and Jamilah Ahmad, PhD is Senior Lecturer, both at the School of Communication, Universiti Sains Malaysia, Penang, Malaysia.

Abstract Purpose The purpose of this research is to gain deeper understanding on how the stakeholders relationship is incorporated in multinational corporations (MNCs) corporate social responsibility (CSR) approach. Design/methodology/approach Stakeholder theory by Freeman was used as the theoretical framework of this research. A case study of two established MNCs in Penang, Malaysia, were conducted and analysed through within-case and cross-case analysis. Three research questions focusing on aspects of CSR (internal and external), concerns of primary and secondary stakeholders based on Carrolls three-domain approach and factors that inuence CSR practices within each stakeholder group were developed. Findings A main theoretical contribution of the study found that MNCs in developing countries are increasingly addressing new ways to incorporate CSR internal and external aspects in their operations which will eventually alter the fundamental process of evaluation among their stakeholders. Given the tendency among developing countries to regard all forms of CSR concerns, economic, ethical and legal concerns are equally important. Another main theoretical contribution of this study highlighted that different locality between home country and foreign country operation does affect the CSR work. Findings of this study show that the view of increasing investor clout on CSR in the country where they do business does not affect the MNCs and the inuence of CSR activist as top CSR issues does not directly inuence MNCs actual CSR work. Research limitations/implications The study has clearly projected the use of stakeholder theory by Freeman. Internal and external aspects of CSR were supported by these organisations as their standard practices. MNCs need to assume these concerns (economic, ethical and legal) for meeting the obligations towards their stakeholders. Stakeholders are signicant drivers of CSR which can affect, or is affected by, the achievement of the organisations objectives. Practical implications The study presents practical implications for policy makers and MNCs in developing countries on new ways of incorporating CSR internal and external aspects in their operations and various concerns (economic, ethical, legal) of stakeholders that have been accepted as necessary for the proper functioning of business. Originality/value This research paper provides a strong base for MNCs and academicians to understand the various aspects, concerns and factors that inuence CSR practices within each stakeholder group. Keywords Corporate social responsibility, Multinational companies, Stakeholder analysis, Malaysia Paper type Research paper

1. Introduction
Being a socially responsible organisation seems like a necessary criterion to do business in the twenty-rst century. Business relies on a multitude of relationships with the stakeholders and staying connected to the parties who have an actual or potential interest in or effect on

DOI 10.1108/17471111011083464

VOL. 6 NO. 4 2010, pp. 593-610, Q Emerald Group Publishing Limited, ISSN 1747-1117

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the business. Organisation nowadays must operate as moral agents in society and they must be prepared to place public service and social responsibility over personal gains and special private interests. Together with the emergence of concepts such as sustainable development, global business citizenship and pressure from and demands by various stakeholders help explain the key role of CSR in the business world. CSR involves the idea of business being proactive in its relationship with a range of social actors (Varey, 1997). Growing pressure on international organisations, also known as MNCs to take responsibility for their operations and stakeholders has resulted on an increasing number of these large corporations starting to address the concept of CSR. Arthaud-Day (2005) noted the signicance of investigating corporate social responsibility (CSR) strategies by MNCs from Asian countries that have been expanding rapidly. Many corporations open manufacturing factories in developing countries, thus bringing mass employment to developing countries as well as other benets to the society. The increased globalisation has also made it even more difcult for these MNCs, since stakeholders expectations are host countries have been added to the list. In Malaysia, American companies continue to be heavily involved in Penang. More than 56 percent of foreign investors in transport equipment manufacturing chose Penang as their manufacturing base. From the period of January to September 2008, Penang remained the most popular location for investors to base their manufacturing plant for export-oriented industry of scientic and measuring equipment (SERI, 2008). Since high-tech production began in Malaysia in the early 1970s, the most serious environmental problem has been the disposal of toxic industrial waste and the absence of social security during the Asian nancial crisis of the late 1990s (Nautilus Institute for Security and Sustainable Development, 2002). The Malaysian governments stand on CSR is that all organisations including MNCs in the country should take account of the economic, social and environmental impacts of their activities on stakeholders. This study followed this call and expanded the research on two main established MNCs based in Penang, namely Agilent Technologies (Malaysia) Sdn. Bhd. and Intel Technology Sdn Bhd that focuses on how stakeholders relationship is incorporated in CSR approach based on the internal and external aspects of CSR; the concerns of CSR (primary and secondary stakeholders) based on Schwartz and Carrolls (2003) three-domain approach and factors that inuence CSR practices within each stakeholders group.

2. Literature review
2.1 CSR CSR has been dened as the duty of the organisation to respect individuals rights and promote human welfare in its operations (Manakkalathil and Rudolf, 1995; Oppewal et al., 2006). Carroll and Buchholz (2000) stated that CSR encompasses the economic, legal, ethical, and philanthropic expectations placed on organisations by society at a given point in time. Freeman and Liedtka (1991) presented seven reasons why the concept of social responsibility is often abandoned. One of the reasons given was, Corporate social responsibility (CSR) promotes incompetence by leading managers to involve themselves in areas beyond their expertise that is, repairing societys ill (Freeman and Liedtka, 1991, p. 92). World Business Council for Sustainable Development (WBCSD) in 1999 dened CSR as the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large (WBCSD, 1999). The World Bank (World Bank Group, 2004) denes CSR as the commitment of businesses to contribute to sustainable economic development working with employees, their families, the local community, and society at large to improve the quality of life, in ways that are good for business and good for development.

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In summary, CSR can be dened as commitment of business to contribute towards economic development while improving the quality of life of society at large in an ethical and responsible manner. CSR may have the potential to strengthen stakeholder relationships and instils greater condence and trust amongst stakeholders by optimising the positive effects and minimising the negative effects of its actions on various stakeholders.

2.2 Stakeholder theory by Edward Freeman Interest in CSR has been inuenced by stakeholder theories (Henderson, 2001). According to Stark (1994), stakeholder theory of the rm is probably the most popular and inuential theory to emerge in the CSR area. Stakeholder theory was developed and presented by Edward Freeman in the 1980s. The stakeholder approach begins by looking at various groups to which the corporation has a responsibility. Freemans (1984, p. 46) original denition is perhaps the most widely used:
A stakeholder in an organisation is [. . .] any group or individual who can affect, or is affected by, the achievement of the organisations objectives.

Evan and Freeman (1993, p. 166) then suggested two simple principles: 1. principle of corporate rights, which demands that the corporation has the obligation not to violate the rights of others; and 2. principle of corporate effect, says that companies are responsible for the effects of their actions on others. The approach of CSR is based on the stakeholder perspective and discussion of the debate on business and society relationships. In fullling CSR obligations, organisations are expected to engage with their stakeholders through various initiatives and activities. Stakeholder Theory typically focuses on the attributes of the actors in the relationships of the rm and the stakeholder.

2.3 Stakeholders engagement in CSR Stakeholder engagement involves ways of staying connected to the parties who have an actual or potential interest in or effect on the business. A stakeholder-oriented approach to CSR emphasises that organisations exist within large networks of stakeholders, all of which stake claims on organisations (Theaker, 2004). Andriof and Waddock (2002) claim that stakeholder engagement integrates stakeholder thinking with ideas from CSR and strategic networking. Stakeholder engagement has been listed as a main aspect to assess the standard of CSR, alongside aspects such as stakeholder commitment, management system, reporting, audit and certication (Tencati et al., 2008). In the light of these two basic principles a stakeholder can be dened in the following slightly more precise way:
A stakeholder of a corporation is an individual or a group which either is harmed by, or benets from, the corporation; or whose rights can be violated, or must be respected by the corporation.

It is said that a company has primary stakeholders, that is, stakeholders that are critical for the continued existence of the company and secondary stakeholders that are affected, directly or indirectly, by the companys decisions (Rosam and Peddle, 2004). A stakeholder-oriented approach to CSR emphasises that organisations exist within large networks of stakeholders, all of which stake claims on organisations. Within the organisation, the interests of these various stakeholders meet and interact with one another and the interests of the organisation. When organisations face demands from stakeholders to recognise the importance of CSR, they generally translate those demands into CSR objectives and develop CSR policies for the stakeholders.

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2.4 Aspects of CSR (internal and external environment) Kok et al. (2001) presented a framework for CSR aspects that is both internal and external. The framework is based on previous literature by Humble (1975 cited in Kok et al., 2001), Certo (1993), and Porter (1990) to give the framework a spectrum as broad as possible concerning the aspects of CSR which affect the stakeholders. The aspects of CSR according to Kok et al. (2001) consist of 14 aspects. The external aspects are: social responsibility and new opportunities, community relations, consumer relations, supplier relations, natural environment, and shareholder relations. The internal aspects are: physical environment, working conditions, minorities/diversity, organisational structure, communication and transparency, industrial relations, and education and training. Finally the combined internal and external aspect is ethics. These aspects can be used as a part of the CSR planning process both strategically and operationally to review current internal and external CSR practices. It is also a way to identify the strategic and practical CSR strengths and weaknesses. It simplies the development of a CSR improvement plan and it provides basic data for measurement of CSR implementation in the organisation. It also identies the ones (stakeholders) able to contribute to the CSR work. 2.5 Concerns of CSR based on Schwartz and Carrolls (2003) three-domain approach CSR implies that corporations have not only economic and legal obligations, but also certain responsibilities to stakeholders that extend beyond these obligations (McGuire and Joseph, 1963). Called the three-domain approach of CSR, these three elements (economic, ethical and legal) are equally important. The denition also implies that social responsibility requires companies not only to strive for economic gains, but also to address moral issues that they face. According to Schwartz and Carroll (2003), for the purposes of their three-domain CSR approach, the economic domain captures those activities which are intended to have either a direct or indirect positive economic impact based on two distinct, but related, criteria: 1. the maximisation of prots; and/or 2. the maximisation of share value. The ethical concern component recognises that corporations should act above bare legal obligations. Ethical concern entails being moral, doing what is right and fair; respecting peoples moral rights; and avoiding harm or social injury as well as preventing harm caused by others (Smith and Quelch, 1993). Schwartz and Carroll (2003) dene their legal concern of CSR pertains to the business rms responsiveness to legal expectations expected by society in the form of federal, state, and local jurisdictions. As Carroll (1979, 1991) has summarised, this part of this social contract is that businesses in turn have an obligation to operate within the legal framework that society has created. CSR is concerned with the needs of stakeholders beyond the merely economic goal but also certain concerns for meeting the obligations required by the stakeholders like ethical and legal responsibilities. This is also supported by Clarksons (1995) denition of social and stakeholder issues that there is a difference between responsibilities towards society and towards stakeholders. 2.6 Factors that inuence CSR within each stakeholders group Different stakeholder groups are the most signicant drivers of CSR for businesses (Warhurst, 2004). Companies understand that they have to respond to stakeholder concerns how companies have performed against social and environmental criteria and being more open in reporting such criteria (Zadek, 1998). 2.6.1 Consumer demand for pro-CSR goods and services. Many studies have been published since the 1970s focusing on demand characteristics of consumers of products and services to which are attached green characteristics natural cosmetics, recycled paper

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and eco-vacations (Crane and Matten, 2001; Bansal and Roth, 2000; Davis, 1994). Prothero (1990) considers eco-consumerism as a strategy to capture new markets. Consumers expect that increased social and environmental tragedy will increase consumer awareness and information of these issues thereby growing the ethical consumer market. 2.6.2 NGOs increasingly sophisticated, coordinated, challenged and divided. Non-governmental organisations (NGOs) are often part of the secondary stakeholder groups, but they can cause signicant damage to a corporation (Clarkson, 1995). Within these groups are the NGOs which are a major driver for companies to perform in an environmentally and socially responsible manner. Henderson (2001), Knox and Maklan (2004) and Greeneld (2004) go even further saying that companies are being blackmailed by NGOs to behave responsibly. 2.6.3 Employees a growing CSR force. Most predictions point to increasing numbers of employees concerned about the social values of their employer. Expectations are that the best and the brightest companies most desire will increasingly use their clout in the labour market to affect increased CSR performance of corporations. Companies with a bad CSR track record will have difculty recruiting compared to their more advanced CSR counterparts (Strandberg, 2002). 2.6.4 Increasing investor clout on CSR. There is some disbelief about the impact socially responsible investment (SRI) will have on the future of CSR. Screening out stocks that negatively impact the environment, labour conditions, human rights or that positively impact communities for example, are increasingly be seen as the weaker investment tool for encouraging CSR (Strandberg, 2002). According to McGuire et al. (1988), CSR is a core corporate duty which consists of corporate decision making, the relationship of the rms social and ethical concerns with nancial performance. 2.6.5 The ripple effect up, down and across the supply chain. For those who addressed the issue of suppliers all agree that large companies will be driving CSR up and down their supply chain. This will come about due to the growing insistence that responsible companies look at the impact not only of their own operations, but that of their business partners. Large corporations are actors to promote CSR among smaller business players to ensure that their suppliers are at least complying with laws and minimal business standards. The issues of responsible supply chain management are CSR and supply chain management (capacity to engage SMEs in CSR activities) and CSR-related instruments (capacity to support SMEs toward pro-CSR initiatives) (Gaspar, 2003). 2.6.6 Governments require mandatory disclosure, voluntary compliance. Governments have encouraged CSR behaviour among businesses (Moon, 2004). There were opinions to which governments will be intervening in the future to encourage more CSR behaviour from the private sector and companies and some are using other voluntary and incentive-based tools such as preferential CSR procurement, export guarantees, investment subsidies, tax credits, CSR criteria for foreign aid and foreign direct investment as well as pension disclosure (Strandberg, 2002). 2.6.7 Environment, social exclusion, governance, accountability and ethics top CSR issues by CSR activist. Concerns about the environment particularly climate change and secondarily water quality and supply/access, social exclusion particularly poverty and access to necessities and governance and accountability, including issues of transparency and integrity, were the top issues raised by CSR activist (Strandberg, 2002). Social expectations and pressure for specic types of CSR have varied over time and are contingent on the nature of the company (Richardson et al., 1999). Increased measurement and monitoring will push the standards and norms higher for all CSR issues, with the result that some companies might specialise particular CSR areas relevant to their business. 2.6.8 Partnership and civil society demands. CSR often draws cultural traditions of philanthropy, business ethics and community embeddedness (Visser, 2008). Good community relation is crucial for sustaining business activities as they are important external auditors that provide legitimacy and license to operate and represent potential channels of business insights for companies to better design products and services (Gaspar, 2003).

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Businesses need to frame CSR as a challenge to nd the most appropriate ways and means to contribute to the development of the communities as well as their stakeholders in which they operate, and to perceive their MNCs as a global citizen. These stakeholders play a credible role in inuencing the companys CSR agenda.

3. Research questions
Based on the previous literature review, the purpose of this research is to gain deeper understanding of how the stakeholders relationship is incorporated in MNCs CSR approach. This purpose has resulted on specic research questions stated below: RQ1. RQ2. RQ3. How can the (internal and external) aspects that affect the performance of stakeholders be dened? How can the concerns of CSR for primary and secondary stakeholders based on Schwartz and Carrolls (2003) three-domain approach be described? How can the factors that inuence CSR practices in MNCs within each stakeholders group be explained?

4. Method
In this study, the researcher compared and investigated a limited number of companies using theory as a base and investigated these companies within their real-life context. Non-probability sampling was used as the sampling technique of this study. The rst sample criterion was that the companies had to be MNCs based in Penang. Thereafter, the MNCs had to be engaged in CSR activities. Purposive sampling strategy was used when selecting the right MNCs for this research study. The two MNCs which were chosen for this study are Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd because these companies are the pioneer US-based companies in Penang and well-recognised for their extensive work in CSR in Penang. Agilent Technologies (Malaysia) Sd. Bhds approach to CSR initiatives and the apparent success it has achieved so far in Malaysia can be seen in different areas like workplace and employee volunteerism such as the Agilents After School project (science workshop for students) Agilent Technologies was named the number one best place to work on the inaugural list of Best Employers in Asia in a study conducted by Hewitt Associates and Dow Jones publications, The Asian Wall-street Journal and Far Eastern Economic Review (Penang Development Corporation, 2004). For Intel Malaysia, they choose education to be the core of its engagement with its community. The company encourages employee volunteerism policy to communicate the importance of education to schoolchildren. Under the Involved Matching Grant Programme (IIMGP) programme, Intel Foundation donates a xed grant amount of US$4 to participating schools for every hour that an Intel employee spends volunteering there. To date, the amount was for 59,720 hours of service by IIMGP volunteers in 23 schools across Penang and Kulim, from January 1 to December 31 in 2007 (The Star Publications, 2009a, b). Intel Malaysia garnered the Responsible Entrepreneurship Award for its corporate responsibility programmes at the Asia Pacic Entrepreneurship Awards 2008 (APEA 2008) in July 2008. In November 2007, Intel Malaysia was awarded the Prime Ministers Corporate Social Responsibility (CSR) Award 2007 for the best Community and Social Welfare initiative in the country. Interviews and documentation were the most apt data collection methods to use for this study. Personal interviews with four senior managers responsible for CSR matters in their organisations were conducted. Companies web sites, annual reports, CSR and sustainable development reports and other printed sources by the companies are examples of documentation were used in this study. When analysing the data collected for this study, the data were reduced through a within-case analysis for each research question and case. Within-case analysis implies that

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a researcher compares a case against previous theory (Yin, 1994). Then, cross-case analyses were made, which further reduced and displayed the data. A cross-case analysis is where the two cases are compared with each other, which allows a researcher to detect similarities and differences of the different cases (Yin, 1994). Both the within and cross-case analyses are displayed in the following chapter. The last step, conclusion drawing and verication is presented in the last chapter, where careful conclusions have been drawn from the different ndings of the research. In order to increase the construct validity, an interview guide was presented to the researchers supervisor prior to the interviews and was checked by the interviewees from Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd. The instrument was pilot tested before the nal version was used in the actual study. The respondents were managers involved in their companys CSR activities. A tape recorder was used during the interviews in order for the researcher to go back to what was said to further increase the construct validity of this study. Regarding the reliability of this study, the respondents were informed about the topic in advance and were given a copy of the same, gures-format, interview guide prior to the interview sessions. This allowed the respondents to prepare themselves for the interviews. During the interviews, the respondents were allowed to speak freely about the topic and leading questions that could affect the answers were avoided. This review also prevents misunderstanding that might have occurred which gives higher reliability.

5. Findings
5.1 Within-case analysis 5.1.1 Aspects of CSR (internal and external environment). Support for RQ1, in relation to the aspects of corporate social responsibility (internal and external environment) is found congruence between the theory and the two cases as well as between the cases parallel, (see Table I) considering that both MNCs (Intel Technology Sdn Bhd and Agilent Technologies (Malaysia) Sdn Bhd) perception of the internal and external aspects of CSR agreed with the literature that these aspects can negatively affect the stakeholders and can be used as capabilities to benet them. However, shareholders relations did not seem to have a signicant importance on both MNCs CSR aspects because of the availability of the procedures to keep shareholders informed about their corporate activities and investment decisions are centralised in their HQs rather than in foreign countries operation. The MNCs subjected to this study, all consider the internal and external aspects of CSR important for their operations. These MNCs believe that the external aspects of CSR: social responsibility and new opportunities, community relations, consumer relations, supplier relations and natural environment, internal aspects of CSR: physical environment, working conditions, minorities/diversity, organisational structure and management style, communication and transparency, industrial relations and education and training and in accordance with the internally and externally aspect which is ethics awareness were all part of the content of Agilent Technologies (Malaysia) Sdn Bhds and Intel Technology Sdn Bhds CSR (see Table I). When it comes to social responsibility and new opportunities, both MNCs engaged in economic, intellectual and social asset in each nation and community in which they do business. Good community relations are essential for both MNCs business. Consumer relations are a central part of these MNCs work in CSR. Having good supplier relations are essential for these two MNCs. These two MNCs have strong interest in the natural environment and address several of these issues in their sustainability reports. Shareholder relations are based at their main head quarters (HQ) because of the availability of procedures to keep shareholders informed about investment decisions are centralised at their main HQ. Physical environment such as health and safety is an area that both MNCs in this study focus on and strive to improve continuously. Both MNCs offer good working conditions for its

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Table I Aspects of corporate social responsibility (internal and external environment)

Internal and external aspects External environment Social responsibility and new opportunities Agilent Technologies (Malaysia) Sdn Bhd Intel Technology Sdn Bhd

Community relations

Social responsibility role includes: support science education, environmental and health and human services needs; public policy issues; environmental, health and safety programmes; workforce diversity and development of products that provide environmental and social benets Increase student interest and achievement in science education, environment, and health and human services issues Customer Satisfaction Programme and Customer Engagement Day Annual Supplier Day Recycling, conservation of resources, prevention of pollution, and promotion of environmental responsibility Procedures to keep shareholders informed about investment decisions are centralised at HQ Preventing work-related injuries and illnesses while increasing awareness of safety implications and improving overall site-safety performance Help employees manage commitments in their work and personal life Employee diversity, inclusion and accessibility such as: non-discrimination policy; accessibility policy; balance between campus recruiting; harassment-free work environment Six VPs from Penang to take charge optoelectronics and motion control products, test and measurement instrument manufacturing, global supply chain development centre for test and measurement and semicon products, HQ for supplier mgt quality, Asia marketing, worldwide manufacturing centre for optical navigation and imaging products and R&D and IC design centre Open-door approach, management by wandering around, extended coffee breaks, and employee hot lines Engages in policy in legislative efforts through discussions, meetings, dialogues and multi-sector efforts and exchanges with joint industries Programmes, workshops and on-the-job learning to help its employees develop their technical and professional capabilities Conduct business with uncompromising integrity and to promote human rights within the companys sphere of inuence

Works with in this area are through the Millennium Development Goals (MDGs)

Consumer relations Supplier relations Natural environment (pollution and packaging)

Intel Involved Matching Grant Programme (IIMGP), VMGP, sponsorship programmes, cash and in-kind donations, and volunteer activities Intels Customer Excellence Programme Intel Malaysias Supplier Day and Supplier Newsletter Environmental goals for energy and water use, climate change impact, and waste recycling are important ingredient of its future business success Procedures to keep shareholders informed about investment decisions are centralised at HQ Long-range goals for environmental health and safety is to prevent all injuries in the workplace Working environment that empowers, motivates, and recognises the achievements of all their employees Equal employment opportunity, but not limited to race, colour, religion, gender, national origin, ancestry, age, marital status, sexual orientation, gender identity, veteran status, and disability Roles of chairman and CEO are separate, and most of Intels company directors are not employees

Shareholder relations

Internal environment Physical environment

Working conditions

Minorities and diversity

Organisational structure and management style

Communication and transparency

Industrial relations

Education and training

Written communications, open forums, webcasts, meetings, blogs and cyber-chats Engages in policy in legislative efforts through discussions, meetings, dialogues and multi-sector efforts and exchanges with joint industries Intel University volunteer instructor programme and training workshops for employees Codes business principles and guidelines promote honest and ethical conduct, deter wrongdoing, and support compliance with applicable laws and regulations

Internally and externally Ethics awareness

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employees, consisting of good wages, insurances, pensions, and employee benets. Minorities/diversity is something that these two MNCs strive to accomplish. The MNCs in this study see organisational structure and management style as important in their business operations. Both MNCs based in Penang are committed to an open communication and transparency practice within the organisations. Both MNCs participate in trade, industry and professional organisations that are local and national by enabling the company to work with other companies on issues that affect the industry by keeping abreast of industry issues. Both MNCs in this study provide all of their employees with education and training in order to develop them as individuals and professionals. Both MNCs in this study emphasise on ethics awareness and their codes of conduct states that they work with high standards of business ethics and integrity in order to show their stakeholders that they are a social responsible company. 5.1.2 Concerns of CSR based on Schwartz and Carrolls (2003) three-domain approach. Support for RQ2 in relation to the concerns of CSR based on Schwartz and Carrolls (2003) three-domain approach also found congruence and the results are provided in Table II. The ndings between the two cases are equal and consistent with the empirical study by Schwartz and Carrolls (2003) three-domain approach (see Table II), suggesting that these MNCs have responsibilities towards each stakeholder (primary and secondary stakeholders) and these responsibilities can be qualied according to Schwartz and Carrolls approach using the economic, legal and ethical responsibilities. This study shows that both MNCs have addressed three different concerns where their CSR work is carried out. These are economic, ethical; and legal. MNCs in this study (Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd) believe that economic concern is important for the following stakeholders:
B B B

employees and managers; customers; local community;

Table II Economic, ethical and legal concerns of corporate social responsibility (CSR) based on Schwartz and Carrolls (2003) three-domain approach
Agilent Technologies (Malaysia) Sdn Bhd Economic Ethical Legal Intel Technology Sdn Bhd Economic Ethical Legal

Stakeholders/concerns Primary stakeholders Shareholders and other investors Employees and managers Customers Local communities Suppliers and business partners Natural environment Future generations Nonhuman species Secondary stakeholders Government and regulators Civic institutions Social pressure groups Media and academic commentators Trade bodies Competitors Environmental interest groups Animal welfare organisations

? N/A N/A N/A N/A N/A N/A N/A

N/A N/A

N/A N/A N/A N/A N/A N/A

? N/A N/A N/A N/A N/A N/A N/A

N/A N/A

N/A N/A N/A N/A N/A N/A

Notes: + The data nding embrace the aspect of the theory; The data nding does not embrace any aspect in the theory; ? The data nding is inconclusive; N/A The data nding is not applicable

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B B

suppliers and business partners; future generations (for Intel Technology Sdn. Bhd.s case only).

Secondary stakeholders are:

B B

government and regulators; and social pressure groups when integrating CSR.

For Intel Technology Sdn Bhd nancial support towards this group of stakeholder (future generations) are seen through their contribution to schools in Penang and Kulim as part of their Intel Involved Matching Grant Programme (IIMGP) (see Table II). Both MNCs claim that their CSR practices for employees and managers are affected by economic concern such as compensation and benets packages for employees and targeting employee cash compensation. These MNCs state that besides selling products and services to customers and they should be involved in business transactions activities. The two MNCs in this study state that economic concern is associated to their CSR practices by giving nancial support for the community. Both MNCs believe in successful partnerships with diverse and small businesses and offer grows opportunities for small and diverse of local suppliers. Intel Technology Sdn Bhd believes all students deserve to have the tools they need to become the next generation of innovators. The companys community care for future generation is evidenced through cash and in-kind donations as well as funding. The two MNCs in this study stated that the companies develop ongoing relationships with the state government in matters concerning corporate taxes on raw materials, components and plant equipment. The two MNCs also support social pressure groups activities by contributing to health and human services by giving monetary donations. Both Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd consider ethical concern to be a framework for the following stakeholders: employees and managers, customers, local community, suppliers and business partners, natural environment, future generations, nonhuman species and secondary stakeholders: government and regulators, civic institutions, social pressure groups, media and academic commentators, trade bodies, environmental interest groups and animal welfare organisations (see Table II). Both MNCs in this study claim that individual performance of executives is measured by business conditions and both MNCs offer programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. Both MNCs believe that the concerns of their customers are affected by ethical concern in which health and safety impacts of products and services are assessed for improvement, and percentage of signicant products and services categories subject to such procedures. The two MNCs in this study have been consciously and strongly committed to community involvement in which employees are encouraged not only to give money, but also time. Ethical concern is important for both MNCs suppliers and business partners whereby environmental, health and safety (EHS) expectations and statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of suppliers were developed. Ethical concern is an area that this two MNCs focus on under natural environment whereby their products and services are assessed across their lifecycles to minimise their negative environmental impacts. Both MNCs state that their ethical concern is important for the future generations. These MNCs show its commitment to diversity and inclusion in the community by awarding grants and establishing partnerships with local universities to expand university curriculum, engage in focused research, and encourage students to pursue a range of opportunities for technical study and research areas. The two MNCs in this study state that ethical concern has the ultimately factor for the CSR work for non-human species in Malaysia through their efforts to increase the number of turtles in Malaysian waters. These MNCs believe that the way they operate business in the country are effected by ethical concern on operational areas like product environmental as well as health and safety concerns. The two MNCs in this study also contribute to dialogues and decision-making on public policies that affect the company, its employees or operations; and these companies

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encourage communication between its managers with civic institutions ofcials like Akademi Sains Malaysia (ASM), Ministry of Education (MOE). These MNCs interactions with social pressure groups to promote mutual understanding on critical issues such as regional education priorities, technology options and solutions for developing countries, improvements in supply chain management, and optimisation of disaster relief efforts are seen through collaborations with local health, human care and environmentalism organisations. Media and academic commentators are important stakeholders for these organisations and play an important role in information sharing. Both MNCs in the study state that ethical concern is crucial and regarded as a key factor to their success in their relations with the trade organisations to achieve its business and citizenship goals by enabling the company to work with other companies on issues that affect the industry, by keeping the company abreast of industry issues and best practices, and by providing a vehicle in which the company can contribute to and inuence public policy. Ethical concern is important for the two MNCs environmental interest group whereby environmental consciousness is part of every aspect of their work. Animal welfare organisation is important to these MNCs through their working relationship with Jabatan Perhilitan Pulau Pinang and the World Wildlife Fund (WWF) to save Malaysias Green Turtles. For both MNCs in this study, legal concern is a framework that is important to: employees and managers, customers, suppliers and business partners, natural environment, government and regulators, civic institutions, trade bodies and environmental interest groups (see Table II). Both MNCs claim that CSR practices for their employees and managers are considered by legal concern statements such as codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation of its employees and managers. The two MNCs in this study state that legal concern contributes to the overall responsibilities for their customers to ensure that the products comply with relevant safety and regulatory requirements. Both MNCs believe that CSR practices for their supplier and business partners are connected to legal concern by stating that the company will not establish or maintain a business relationship with a supplier if the company believes that its practices violate local laws relating to labour standards or environmental protection and OSH certication. These MNCs mention that legal concern is aligned with the natural environment in order to provide products and services that meet legal and regulatory requirements, including applicable environmental standards and policies. The two MNCs in this study believe that legal concern play an important role for government and regulators. Both MNCs have ongoing relationships with regulators at local, regional and national levels such as Ministry of Human Resources regarding operational areas such as product environmental and safety compliance. The two MNCs state that legal concern is important to civic institutions as the way they do business. These companies often collaborate with National Institute of Occupational Health and Safety Malaysia (NIOSH) and Social Security Organisation (SOCSO) when it comes to employees occupational safety and Employees Social Security Act. These MNCs state that legal concern is crucial and regarded as a key factor to their success in their relations with the trade organisations like Malaysian Industrial Development Authority (MIDA) on industrial relations issues, such as investment climate, infrastructure policies, and labour-related issues such as foreign workers policies. Legal concern for environmental interest groups is important for both MNCs in this study. Both MNCs formed approaches approach to managing potential environmental impacts and demonstrate its commitment to worldwide environmental excellence by completing independent third-party audits at its manufacturing sites each year that focuses on regulatory compliance. 5.1.3 Factors that inuence CSR practices within each stakeholder group. Support for RQ3 in relation to the factors that inuence CSR practices within each stakeholders group, is found congruence between the two cases and to some extent consistent with the literature review (see Table III). The nding has signicant implications for MNCs in the developing countries which suggested that there are a number of factors that inuence CSR practices within each stakeholders group for MNCs in foreign countries operation. Contrary to the

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Table III Factors that inuence corporate social responsibility practices within each stakeholders group
Factors Consumer demand for pro-CSR goods and services NGOs increasingly sophisticated, coordinated, challenged and divided Employees a growing CSR force Agilent Technologies (Malaysia) Sdn Bhd Take-back recycling programmes to meet the WEEE Directive requirements Fund raisers, book and food donation drives, technology support programmes and equipment donation programmes Use up to four hours of company time per-month, to work on company-sponsored community activities Corporate investment decisions are all centralised at their main head quarters Supplier to follow responsible management practices Communicate its economic, environmental and social performance/CSR disclosure Can only be viewed as a source of information and feedback on these companies fullment of their CSR Provides local contributions to support civil societys demands on science education and health and human services and that are Inspiring Minds and Enriching Lives in the communities Intel Technology Sdn Bhd Energy efciency, outstanding performance, and innovative materials for eco-smart product designs Education and technology inclusion, environmental stewardship and safety, health and community engagement Employee volunteerism through IIMGP and VMGP Corporate investment decisions are all centralised at their main head quarters Supplier ethics, greening of the supply chain and supplier diversity Forms partnerships with the government to build education programmes that address the needs of different communities Can only be viewed as a source of information and feedback on these companies fullment of their CSR Look for creative ways to help increase economic growth, protect the environment, improve healthcare, enhance education, and make government more efcient in communities

Increasing investor clout on CSR The ripple effect up, down and across the supply chain Governments require mandatory disclosure, voluntary compliance Environment, social exclusion, governance, accountability and ethics top CSR issues by CSR activist Partnership and civil society demands

literature review, increasing investor clout on CSR and environment, social exclusion, governance, accountability and ethics as top CSR issues by CSR activist factors did not seem to have signicant importance on these MNCs CSR approach. These may be direct factors of the fact that control ownership over these aspects is based in their home country, although clearly more research on this topic is needed. Factors inuencing the two cases in CSR were quite similar overall in connection to the conceptualised literature. Factors that inuence CSR within each stakeholders group that were agreed on by the two cases were:
B B B B B B

consumer demand for pro-CSR goods and services; employees a growing CSR force; ripple effect up, down and across the supply chain; governments require mandatory disclosure, voluntary compliance; partnership and civil society demands; and NGOs increasingly sophisticated, coordinated, challenged and divided (see Table III).

These MNCs state that consumer factor absolutely inuence their CSR work. Throughout the last decade, people have become increasingly aware of how the manufacturing and use of electronics can affect the environment. The inuence of NGOs is something that these MNCs in the study fully agree with and that they need to behave responsibly and partnered with NGOs in their CSR work, where they operate. Both Agilent Technologies (Malaysia) Sdn Bhds and Intel Technology Sdn Bhds primary objective is to be recognised as a responsible corporate citizen, particularly through volunteerism among its employees. Another factor that inuences these MNCs CSR practices is managing their suppliers. The rise of emerging economies generates a challenge of managing supply chains across countries with different regulations and norms for CSR. The two MNCs in this study share the opinion that governments require mandatory disclosure, voluntary compliance can affect their companies CSR initiatives. Both MNCs in this study believe that civil society demand as a part of the drivers that affect their CSR work.

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The somewhat surprising discovery for this research was that the inuence of environment, social exclusion, governance, accountability and ethics issues by CSR activist and increasing investor clout on CSR do not inuence both Agilent Technologies (Malaysia) Sdn Bhds and Intel Technology Sdn Bhds CSR initiatives. The two MNCs in this study share the same opinions that increasing investor clout on CSR does not inuence their CSR practices. These companies only need to take responsibility over this aspect in their home country rather than in foreign markets. The role of CSR activist on environment, social exclusion, governance, accountability and ethics issues directly does not affect how MNCs in this study are working with their CSR initiatives. Instead the inuence of CSR activist can only be viewed as a source of information and feedback on these companies fullment of their CSR and in form of collaboration. 5.2 Cross-case analysis 5.2.1 Comparison of aspects of corporate social responsibility (internal and external environment). In regard to the aspects of corporate social responsibility (CSR), the congruence between the theory and the two cases as well as between the cases is similar. The external aspects that the two MNCs look into are: social responsibility and new opportunities, community relations, consumer relations, supplier relations, and natural environment and were all agreed with the literature. The internal aspects that the two MNCs look into are: physical environment, working conditions, minorities/diversity, organisational structure and management style, communication and transparency, industrial relations, and education and training. Finally, both Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd were clearly in accordance with the internally and externally aspect which is ethics awareness and agreed with the literature. 5.2.2 Comparison of concerns of CSR based on Schwartz and Carrolls (2003) three-domain approach. The analysis of CSR economic concern for both MNCs show similarities and agreed with the theory and literature. The analyses of the two MNCs subjected to this study all indicate that economic concern is important when integrating CSR. Both Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd have economic responsibilities towards the following primary stakeholders: employees and managers, customers, local community, suppliers and business partners, and secondary stakeholder are: government and regulators and social pressure groups and future generations (applicable for Intel Technology Sdn Bhd only). Both Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd agreed with the literature and have the following primary stakeholders: employees and managers, customers, local community, suppliers and business partners, natural environment, future generations, nonhuman species, and, secondary stakeholders: government and regulators, civic institutions, social pressure groups, media and academic commentators, trade bodies, environmental interest groups, and animal welfare organisations that they found are important and need to be taken into ethical consideration under their CSR initiatives. The two MNCs state that legal concern is a fundamental part of the organisation and that they have a culture that supports such concern. From the analyses regarding the MNCs legal concern, a great amount of similarities are visible. Both MNCs perform legal practices and actions within their primary stakeholders group: employees and managers, customers, suppliers and business partners, natural environment as well as their secondary stakeholders group: government and regulators, civic institutions, trade bodies and environmental interest groups. However, the research found that both MNCs disagree with the literature on legal responsibility towards social pressure groups and media and academic commentators. MNCs only play important role in supplying ethical corporate information to these stakeholders and support the social pressure groups by participating in CSR activities that will benet the society at large. 5.2.3 Comparison of factors that inuence CSR practices within each stakeholder group. The factors inuencing the two cases CSR in MNCs based in Penang were quite similar overall in connection to the conceptualised literature. Factors that inuence the CSR practices within

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each stakeholders group that were agreed on by the two cases are: consumer demand for pro-CSR goods and services; NGOs increasingly sophisticated, coordinated, challenged and divided; employees a growing CSR force; the ripple effect up, down and across the supply chain; governments require mandatory disclosure, voluntary compliance; and partnership and civil society demand. Increasing investor clout on CSR as a factor that inuences their CSR practices was disagreed on by both Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd, who stated that the procedures to keep shareholders informed about their corporate investment decisions were all centralised at headquarters and these companies only need to take responsibility over this aspect in their home country rather than in foreign markets. The somewhat surprising discovery for this research was that the inuence of environment, social exclusion, governance, accountability and ethics issues by CSR activist is not an inuential factor for both Agilent Technologies (Malaysia) Sdn Bhd and Intel Technology Sdn Bhd even though they state that CSR activist which is a part of the institutional consequences can inuence their CSR initiatives. The inuence of CSR activist can only be viewed as a source of information and in form of collaboration as well as feedback on the companys fullment of their CSR initiatives.

6. Discussion
This study has concluded that MNCs in Penang have high involvement in their CSR activities towards their stakeholders. Large businesses are increasingly aware about their responsibilities towards their stakeholders. The study has clearly projected the use of Stakeholder Theory (1984) by Edward Freeman, the main theoretical framework of this study. The role of stakeholders relationship in CSR practices among business practitioners is needed to improve the representation of these organisations with its community stakeholders as a standard business practice where they do business. 6.1 How can the (internal and external environment) aspects that affect the performance of stakeholders be dened? With reference to objective 1, internal and external aspects of CSR, the studys ndings strongly suggest that internal and external aspects of the CSR content are important to include for companies working in a global market. These include: social responsibility and new opportunities; community relations; supplier relations; natural environment (pollution and packaging) and future generations; physical environment; working conditions; minorities and diversity; organisational structure and management style; communication and transparency; industrial relations; education and training; and ethics awareness. The incorporation of internal and external aspects of CSR ensures that these MNCs are responsible towards stakeholders and identies the ones able to contribute to CSR work. Kok et al. (2001) have said that these internal and external aspects can be used as a part of the CSR planning process both strategically and operationally to review current internal and external practices. The results of this study is also supported by Dan OBrien (2001), have said that these aspects can negatively affect the stakeholders and can be used as capabilities to benet them. 6.2 How can the concerns of primary and secondary stakeholders based on Schwartz and Carrolls (2003) three-domain CSR approach be described? With reference to objective 2, concerns of primary and secondary stakeholders based on Schwartz and Carrolls (2003) three-domain CSR approach, both MNCs agree with the literature and have economic, ethical and legal as a part of the concerns for their stakeholders. Economic concern is important for both business and non-business stakeholders like employees and managers, customers, local community, suppliers and business partners, future generations (for Intel Technology Sdn Bhds case), and secondary stakeholders are:

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government and regulators and social pressure groups when integrating CSR. As Marks and Rapoport (2009) have stated, businesses are essentially good for society. The result of this study also found that ethical concern is crucial in MNCs CSR initiatives. Such concern agrees with the literature and have: the following primary stakeholders: employees and managers, customers, local community, suppliers and business partners, natural environment, future generations, nonhuman species and secondary stakeholders: government and regulators, civic institutions, social pressure groups, media and academic commentators, trade bodies, environmental interest groups, and animal welfare organisations and agreed that MNCs should act morally. Marks and Rapoports (2009) study has shown that corporations should act morally, as judged by how society views their actions. The two MNCs agree that legal concern is a fundamental part of the organisation and thus they perform legal practices and actions within the following stakeholder groups: employees and managers, customers, suppliers and business partners, natural environment, government and regulators, civic institutions, trade bodies, and environmental interest groups. Carroll (1979, 1991) has summarised that the society has sanctioned their existence, and thus part of this social contract is that businesses in turn have an obligation to operate within the legal framework that society has created. Schwartz and Carrolls (2003) three-domain approach asserted that companies have responsibilities towards each stakeholder and these responsibilities can be qualied according to Schwartz and Carrolls approach using the economic, legal and ethical responsibilities. The results of this research is also supported by Clarksons (1995) denition of social and stakeholder issues that there is a difference between responsibilities towards society and towards stakeholders. 6.3 How can the factors that inuence corporate social responsibility practices in MNCs within each stakeholder group be explained? With reference to objective 3, factors that inuence CSR practices in MNCs within each stakeholders group, this study has found that there are many factors that inuence CSR practices within each stakeholders group and the fact that the companies mostly agree with the factors of inuence brought up in this study acts as evidence for that. The study shows that the factors inuencing CSR within each stakeholders group are: consumer demand for pro-CSR goods and services; employees a growing CSR force; ripple effect up, down and across the supply chain; governments require mandatory disclosure, voluntary compliance; partnership and civil society demands; and NGOs increasingly sophisticated, coordinated, challenged and divided. It is important for MNCs to understand that they have to respond to stakeholders concerns and conforms to the prevailing norms and expectations of social performance given by their stakeholders. The research has found quite interestingly that different locality between home country and a foreign countries operation does affect the CSR work in MNCs. Even though Strandberg (2002) had proven that shareholder action will have impact in the CSR marketplace and establish incentives that drive corporations towards CSR, however, the ndings of this study shown that the view of increasing investor clout on CSR in the country where they do business does not affect these MNCs CSR practices because MNCs only need to take responsibility over this aspect in their home country but not in foreign markets. The results found that the inuence of CSR activist that include environment, social exclusion, governance, accountability and ethics as top CSR issues in MNCs does not directly inuence MNCs actual CSR work. The inuence of CSR activist can only be viewed as a source of information and feedback on the companys fulllment of their CSR.

7. Conclusions
This paper has focused attention on the determinants of how stakeholders relationship is incorporated in the CSR approach in MNCs. The research has evaluated both recognised

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antecedents based on the original work of Edward Freemans stakeholder theory and Schwartz and Carrolls (2003) three-domain CSR approaches (economic, ethical and legal). A case study of two main established MNCs based in Penang, shows that in the current research context, stakeholders relations is the most signicant predicator of CSR, suggesting that the stakeholders relationship is needed to improve the representation of these organisations with its community stakeholders as a standard international business practice. The ndings have a number of theoretical as well as practical implications for policy makers, especially those in the developing economies. A main theoretical contribution of the study is that the study found that MNCs in developing countries are increasingly addressing new ways to incorporate CSR internal and external aspects in their operations which will eventually alters the fundamental process of evaluation among their stakeholders where they operate. Given the tendency among developing countries to regard all forms of CSR concerns, therefore economic, ethical and legal concerns are equally important for MNCs. A key practical implication of the study to policy makers is that most primary stakeholders want MNCs to behave economically. Ethical concern is a norm that has been accepted by most stakeholders as necessary for the proper functioning of business in both developed and developing countries. MNCs are also expected to operate within the legal framework that these stakeholders have created in their business transactions and generally provide greater incentives for a move towards CSR in their country. Another main theoretical contribution of this study is that it shed lights on the key factors of CSR within each stakeholders group in the contexts of developing countries and highlighted that different locality between home country and a foreign countries operation does affect the CSR work in MNCs. Findings of this study shown that the view of increasing investor clout on CSR in the country where they do business does not affect these MNCs CSR because MNCs only need to take responsibility over this aspect in their home country but not in their foreign markets. The results found that the inuence of CSR activist that include environment, social exclusion, governance, accountability and ethics as top CSR issues in MNCs does not directly inuence MNCs actual CSR work. The inuence of CSR activist can only be viewed as a source of information and feedback on the companys fulllment of their CSR initiatives, although clearly more research on this topic is needed.

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Further reading
Accountability (2007), The state of responsible competitiveness 2007, available at: www. accountability21.net (accessed 13 January 2009). Crane, A. and Matten, D. (2003), Business Ethics: A European Perspective. Managing Corporate Citizenship and Sustainability in the Age of Globalisation, Oxford University Press, Oxford. Ethical Corporation (2006), Ethical Corporations guide to the Holy Grail: The business case for corporate responsibility, available at: www.ethicalcorp.com/content.asp?ContentID 4415&Cont TypeID (accessed 13 January 2009). (The) New Straits Time Press Malaysia Berhad (2007), NST praised for its social responsibility, available at: www.nstp.com.my/Corporate/nstp/current/news/20070726163903/Article/index_html (accessed 21 October 2008).

Corresponding author
Jamilah Ahmad can be contacted at: jahmad@usm.my

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