CORPORATE CITIZENSHIP AND REPUTATIONAL VALUE
Caz Batson
Hawke Institute
University of South Australia
St Bernard’s Road
Magill SA 5072 Australia
Ph: 61 8 8302 4371
Email: carol.batson@unisa.edu.au
In his influential book “Reputation: Realizing Value from the Corporate Image”,
Charles Fombrun (1996) asserted that the reputation of a corporation is
nothing more nor less than an aggregation of the perceptions, or cognitions,
that people hold about its credibility, its reliability, its responsibility and its
trustworthiness. In this context, he proposed the following operational definition
of corporate reputation:
“…A corporate reputation is a perceptual representation of a company’s past
actions and future prospects that describes the firm’s overall appeal to all of its
constituents when compared with other leading rivals..." (p.72)
More recently, Fombrun, Gardberg and Barnett (2000, p.88) have argued that
corporate citizenship “is an integral component of a cycle through which
companies generate reputational capital (conceptualised by Frombrun as the
value of intangible assets excluding intellectual capital), manage reputational
risk and enhance performance”.
The idea that pro-active, strategic engagement in corporate citizenship will
deliver benefits to the bottom line is, of course, not new. The problem,
however, is that there is presently a paucity of empirical evidence to either
substantiate or refute this claim and, in the absence of this, the apparent
reluctance of many Australian organisations to jump on the ‘corporate
citizenship bandwagon’ can perhaps be justified.
Fortunately, the scope of empirical research now appears to be widening, as
recently evidenced in the work of King and Mackinnon (2000, 2001) here in
Australia and that of Maignan and Ferrell (2000, 2001) overseas. These
researchers who, respectively, have investigated differences in community and
consumer perceptions of corporate citizenship, have also sought to measure
stakeholders’ intentions to support socially responsible organisations. Such
research, I would suggest, paves the way to a more comprehensive
understanding of the multi-dimensional nature of corporate citizenship and a
more critical exploration of the differential value various stakeholder groups
may accord to related practices.
The ‘Corporate Citizenship and Reputational Value’ Project
The ‘Corporate Citizenship and Reputational Value’ Project was formally
established in the University of South Australia’s Hawke Institute of Social
1
Research in late 1999 in partnership with the National Heart Foundation of
Australia. Stage 1 of the project, undertaken by Dr Debra King in collaboration
with Professor Alison Mackinnon, concluded some 12 months later. Stage 2
commenced in June 2001 with funds made available by the Hawke Institute
itself.
When the prospect of a partnership with the National Heart Foundation of
Australia was first discussed, the mutual point of interest was to find ways to
encourage the take-up of corporate citizenship practices by Australian
organisations. It was recognised, in this context, that corporate citizenship
could be more effectively marketed if the nature of related practices, and their
potential to impact both reputation and the economic value of reputation, was
better understood. Our central research hypothesis was thus cast in simple
terms – “that adopting corporate citizenship practices influences the value of a
corporation’s reputation” – and the following aims were established to guide
the investigation:
1. To examine the extent to which corporate citizenship influences stakeholder
perceptions regarding the reputation of corporations.
2. To examine the extent to which stakeholder perceptions regarding
reputation influences stakeholder behaviour.
3. To identify the attributes or factors that influence corporate reputation.
4. To develop a mechanism for measuring and comparing corporate
reputation.
The Research Framework
Community participation in corporate citizenship research has previously
occurred at the macro level, where perceptions regarding the roles and
responsibilities of business have formed the primary focus (cf. Clemenger,
1998; Environics, 2000) and the micro level, where the performance and
practices of individual organisations has attracted attention.
Positioned between the macro and micro levels, however, is another level of
analysis, the mesa level, which my colleagues judged could provide a new and
valuable opportunity to further investigate the nature of corporate citizenship
and its relationship to reputation and reputational value.1 More specifically,
having chosen to work at the mesa-level, King and Mackinnon were able to
measure the extent to which community members – conceptualised as
‘potential stakeholders’ - valued certain aspects of corporate citizenship over
King and Mackinnon (2001) have argued that Fombrun’s (1996) concept of ‘reputational
capital’ covers the value of intangibles that may or may not relate to reputation. In view of this,
they utilised the concept of ‘intentions to deal’ (eg. use product or services, invest in, work for)
as an indicator of reputational value.
1
2
others.2 They were also well placed to examine the influence of demographic
and/ or stakeholder group variables on perceptions and intentions to deal.
‘The Responsibilities of Business in Society’ Survey
The central feature of the survey mailed out to 2,200 randomly selected
households across Australia in March 2000 was an inventory of 40 corporate
citizenship practices derived from an extensive review of the corporate social
responsibility literature and an ‘expert’ consultation process.3 The practices
were grouped into the broad categories of ‘Community’, ‘Management’,
Workplace’ and ‘Environment’ and the majority were then further classified into
sub-categories (see Figure 1). The order in which the various practices
appeared in the survey instrument was, however, randomly selected.
Figure 1: The hierarchical relationships among the sub-scales of the Corporate
Citizenship Scale
CORPORATE
CITIZENSHIP
REPUTATION
INTENTION TO DEAL
((40)
Subset
Community



Involvement (5)
Sponsorship (4)
Development (4)
Community
Management



Governance (5)
Ethics (4)
Marketing (5)
Management
Workplace


Employees (6)
Human Rights (2)
Environment

General (5)
Workplace
Environment
The term ‘potential stakeholders’ was employed to draw a conceptual distinction between
community members who are actual stakeholders in various corporations and those who have
the potential to become stakeholders based on their perceptions of any corporation’s practices
and performance.
3 The response rate of useable surveys was 13.7% (274). Although low, this rate was
considered reasonable in view of the unsolicited and very specific nature of the survey. The
sample size has proved adequate for all statistical analyses undertaken in the project to date.
2
3
For each corporate citizenship practice listed in the inventory, responses to two
questions about a hypothetical corporation were sought:
1. To what extent would knowing about this aspect of corporate behaviour
influence what you think about the corporation’s reputation?
2. To what extent would knowing about this aspect of corporate behaviour
influence your decision to deal (use products/ services, invest in, work for)
with this business in the future?
The 5-point Likert scales attached to each item ranged from -2 (decrease
reputation/ dealings a lot) through 0 (no change) to +2 (increase reputation/
dealings a lot).
In addition, survey respondents were asked to:




Identify the circumstances in which a corporation’s financial or social
performance would hold importance for them
Evaluate the capacity of various stakeholder groups to influence corporate
behaviour
Rank key attributes of corporate reputation
Provide demographic and stakeholder group membership data
Outcomes of the Research
The data obtained from the national survey has been and, indeed, continues to
be subjected to rigorous statistical analyses. Whilst it is beyond the scope of
the present paper to discuss these in any detail, key features of statistical
treatments and outcomes are highlighted below.
The Corporate Citizenship Scale
Through Rasch scaling, the coherence of the proposed Corporate Reputation
and Future Dealings Intentions scales and all other scales in the Corporate
Citizenship instrument was first established. A total of 3 items were removed
from the instrument in the process.
Two statistical techniques were then employed to examine the relationship
between corporate behaviour, stakeholders’ perceptions of reputation and their
intentions to deal in light of these. First, the correlations between the various
reputation and intention to deal scales were determined and all were found to
be high and highly significant (p<<.000). Accepting that there are reasonable
theoretical grounds for arguing a causal relationship, the correlation values
suggest that between 66 – 77% of the variation evident in intentions to deal
can be explained by changes in reputation perceptions. Second, a path model
of the relationship between reputation and intentions to deal was developed
and tested (see Figure 2) and, consistent with the first analysis, the results
indicated that 76% of the variation in intentions to deal could be explained by
changes in reputation perceptions. As well, the path analysis results provided
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some evidence that community stakeholders ascribe equal importance to the
four broad corporate citizenship categories.
Figure 2: Generalised path model of the relationship between reputation and
intentions to deal.
Community ITD
Community REP
Management ITD
Management REP
REPUTATION
INTENTION
TO DEAL
Workplace ITD
Workplace REP
Environment REP
.858
3
Environment ITD
In summary, then, the results of the initial analyses confirmed that 37 of the 40
original items used in the Corporate Citizenship instrument formed a coherent
scale that exhibited good psychometric properties and could thus be replicated
with confidence for use in other settings and with other stakeholder sample
groups.
As illustrated in Figure 3, the 37-item Corporate Citizenship instrument yields
two weighted scores for each corporate behaviour. The first score (top bar)
provides a measure of the change in reputation perceptions that might be
expected to occur if an organisation adopted the practice in question; the
second score provides a measure of change in intentions to deal. The scale
thus supports comparative analyses of the extent to which corporate
behaviours in the citizenship domain are likely to influence reputation and
reputational value. On the basis of the national survey results, for example, the
five corporate citizenship activities most likely to exert a positive influence on
reputation and intentions to deal are:
W2
Retrain employees to avoid redundancies (REP=394; ITD=330)
C1
Assist in the development of employment programs for the
unemployed in a local region (REP=389; ITD=333)
E2
Focus on increasing the use of recyclable materials in
manufacturing processes (REP=386; ITD=325)
E3
Become industry leaders in developing environmentally
sustainable business practices (REP=376; ITD=328)
C2
Subsidise and maintain its services to rural communities
(REP=365; ITD=308)
5
Activities that will exert a negative influence on reputation and intentions to
deal, denoted with an asterisk (*) in Figure 3, can also be readily identified:
W1
Employ children under 10 years old in offshore factories
(REP=506; ITD=480)
E1
Disregard scientific evidence indicating that the corporation is
polluting a major water source (REP=498; ITD=480)
M1
Disregard evidence that there could be safety implications for
customers using one of its products (REP=437; ITD=430)
M2
Sell its customer list to an advertising company (REP=407;
ITD=383)
M3
Decrease the quality of its products to retain its price
competitiveness (REP=362; ITD=354)
Having noted before that the 37-item Corporate Citizenship instrument has
good psychometric properties and can thus be replicated with confidence, we
have nonetheless worked over the past year to refine it and to also identify a
subset of items as the basis for a short form of the instrument. In so doing, we
have restricted our attention in the second stage of the project to the Corporate
Reputation scale.
The Factor Structure of the Corporate Reputation Scale
Bearing in mind King and Mackinnon’s (2000, 2001) premise that four
categories of corporate citizenship influence people’s overall perception of
corporate reputation, confirmation of the factor structure of the Corporate
Reputation scale was obviously required. To accomplish this, three hypotheses
representing theoretically important alternatives were initially tested using
confirmatory factor analysis (CFA) and the original 40 corporate reputation
practice items. The alternative models, presented diagrammatically in Figure 4,
were as follows:
A
A one factor model which, if shown to be the best fitting model,
would indicate that King and Mackinnon’s hypothesised subscales do not form constructs that can be usefully differentiated
from a single, overall Corporate Reputation construct.
B
A model comprising four discrete but correlated constructs
(Community Reputation, Management Reputation, Workplace
Reputation, Environmental Reputation) that do not necessarily
combine to reflect a single, overall Corporate Reputation
construct (ie. are not subordinate).
C
Consistent with King and Mackinnon’s conceptualisation, a
hierarchical four-factor model in which the four separate
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constructs listed above in B reflect a single underlying Corporate
Reputation construct.
Figure 4: Three alternative models of the factor structure of the corporate
Reputation Scale.
Item 1
Item 1
Item 2
Item 3
Item 2
ComRep
Item 1
Item 2
Item 3
ComRep
Item 4
Item 4
Item 4
ManRep
CorpRep
ManRep
Item 20
Item 20
Item 21
Item 21
WorkRep
Item 20
CorpRep
WorkRep
EnvRep
Item 38
A
EnvRep
Item 39
Item 40
Item 40
Item 21
Item 38
Item 39
Item 38
Item 39
B
Item 3
Item 40
C
The fit statistics calculated in respect of the three models indicated that model
A was not well supported by the data and that although models B and C were
both somewhat better supported, their fit was certainly less than expected.
With the adequacy of the sample size not at issue, it was evident that some
refinement of the instrument was needed to achieve better model fit.
Efforts to refine the Corporate Reputation scale have now also led to the
development of a 20-item version (CR20). This has been found to have
excellent fit characteristics and the data obtained in respect of it support King
and Mackinnon’s hypothesised instrument structure – an overall Corporate
Reputation scale with four subordinate scales. It is also noteworthy that
although certain demographic and stakeholder variables were found to exert a
modest influence on sub-scales of the CR20, none were strong enough to
pose a threat to the measurement validity of the short form.
In their current forms, both the short and long versions of the Corporate
Citizenship Scale pose generic questions about a hypothetical organisation –
and some of these still need to be tightened up to force respondents to make
harder choices. This said, the theoretical and analytical steps we have taken in
the course of our research clearly point to the fact that the scale can be
modified or extended – with integrity – for use in different settings and with a
variety of stakeholder groups. If the purpose is to gain specific information
about an organisation or sector, for example, scale items can be edited to
reflect relevant practices and parallel forms can be used to tap respondents’
actual knowledge as well as their views. Equally, the scale can be used to
gauge, target, build and monitor stakeholder support and to inform the
development and implementation of internal and external corporate citizenship
strategies and related communications.
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Conclusion
To conclude, then, the research undertaken by the Hawke Institute empirically
supports Fombrun, Gardberg and Barnett’s (2000) assertion that ‘good’
corporate citizenship positively influences reputation and the economic value of
reputation. Recognising the controversy surrounding the concept of corporate
citizenship itself, and the means by which its influence might best be
measured, we developed a comprehensive instrument that was firmly
grounded in theory and which introduced the behaviour-based concept of
‘intentions to deal’ as a new measure of reputational value. Using data derived
from a national survey of ‘potential’ stakeholders, the Corporate Citizenship
Scale has held up under very rigorous testing conditions and thus we can
confidently attest to its utility. There remains, however, some scope to further
improve the scale before it is made more widely available and we hope to
complete this work in the near future.
References
Clemenger Report (1998) What Ordinary Australians think of Big Business and
What Needs to change?, Sydney: Clemenger.
Environics, 2000. The Millenium Poll on Corporate Social Responsibility:
Executive Briefing, Toronto: Environics International.
Fombrun, C. J. 1996. Reputation: Realizing value from the corporate image.
Boston, MA: Harvard Business School Press.
Fombrun, C. J., Gardberg, N. A. & Barnett, M. L. 2000. Opportunity platforms
and safety nets: Corporate citizenship and reputational risk. Business
and Society Review, 105, 1, 85 – 106.
King, D. & Mackinnon, A. 2000. Corporate citizenship and reputational Value:
The marketing of corporate citizenship, Magill, Australia: Hawke
Institute, University of South Australia.
King, D. & Mackinnon, A. 2001. Who cares? Community perceptions in the
marketing of corporate citizenship. Journal of Corporate Citizenship,
Autumn, 37 – 53.
Maignan, I. 2001. Consumers’ perceptions of corporate social responsibilities:
A cross-cultural comparison. Journal of Business Ethics, 30, 57 – 72.
Maignan, I. & Ferrell, O.C. 2000. Measuring corporate citizenship in two
countries: The case of the United States and France, Journal of
Business Ethics, 23, 283 – 297.
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