The Social Role of Business in Central Europe

The ongoing moralization of business has led to a broader understanding of corporate responsibility since the privatization in East Central Europe

For the last fifteen years, business in Europe has been the subject of increasing moralization— often seen either as part of the ongoing weakening of collective regulation and welfare state provisions, or as a means of correcting this development. In 2001, the European Union (EU) launched a Green Paper to promote European framework for Corporate Social Responsibility (CSR) as part of its strategy of “soft regulation.” Since then, CSR initiatives have flourished in the “old” and “new” EU member states, with the “old” member states just a couple of years in front. Yet the institutional and cultural settings in which the CSR movement took seed vary from country to country. In Germany, for example, it meets a relatively strong corporatist and welfare tradition which shapes the understanding of companies’ responsibilities to the society. Companies of posttransition member states, in contrast, abandoned most of the social function that they had to fulfill under state socialism, and now they have relatively weak corporatist arrangements and welfare provisions.

In the everincreasing literature on CSR in Europe, the focus is mainly on the diffusion of CSR practices. How business leaders perceive their social role in society and how this fits with their actual behavior is underresearched, in the West as well as in the East, and comparing the two led to a research project on “Business Elites in Enlarged Europe” conducted by an international research group among business leaders in Poland, Hungary, and East and West Germany. We asked whether the different business environments and legacies are reflected in executives’ perceptions. Since a hegemonic neoliberal discourse holds sway not only in East Central Europe but also in Germany—or at least did until the financial crisis—the answer to this question is far from obvious.

The data was gathered during 2009/10. We differentiate between mediumsized companies (45 to 249 employees); large companies (250 to 999 employees); very large companies (1,000 employees and more); banks and insurance companies. In total, 165 companies in Poland, 169 in Hungary and 523 in East and West Germany were considered. The target persons for data collection were members of the top company hierarchical level.

Cognitive Concepts of Responsibility

In the new moral discourse on corporate responsibility, the positions range from “narrow” to “broad” understanding. A narrow position is that of Milton Friedman’s famous dictum, “the responsibility of business is to increase its business.” The broad position is reflected in the definition of CSR as voluntary activities beyond what is required by law. This understanding can be practiced in two ways: 1) companies claim individual “authorship” and reject collective binding, which is associated with liberal institutional settings;) companies bind themselves to collective regulation typical for more corporatist environments. Based on these considerations we operationalized the three cognitive concepts of responsibility: a minimalist concept; a neocorporatist concept that combines the acceptance of a need to do more than just business with social partnership and collective bargaining; and a liberal concept that prefers an individualist, firmspecific approach and refutes collective binding. We also operationalized a set of ideas as etatist, assuming that Friedmanites but also adherents of our “liberal” concept of responsibility reject the idea of strong state intervention.2 We expected to find more “neocorporatists” in the German sample (especially in large West Germany companies) and more “minimalists” in Poland and Hungary. Keeping the neoliberal discourse in mind, we also expected widespread skepticism about statebased market regulation and redistribution in all three countries.

Findings

The four theoretically distinct concepts— minimalist, liberal, neocorporatist and etatist— cover slightly more than one half of the respondents (386 out of 749). The other half of the sample disagrees with the minimalist concept of companies’ responsibility, but did not fit in any of the other categories. As expected, neocorporatism is significantly more frequent among West Germans, who represent 25 percent of all 126 respondents belonging to this group. Neocorporatists are in general more widespread in larger companies and even banks, indicating that across countries the acceptance of social partnership and unions grows with company size (least so in Poland), while managing owners and family firms also in West Germany disagree more with this.

Apart from size and ownership effects, clear country variations were detected. While a neocorporatist approach to CSR is clearly underrepresented in Poland and Hungary, we find significantly more minimalists in the two countries. Being from Poland doubles the likelihood of belonging to the group of minimalists. Interestingly, size effects are not significant here, indicating that a minimalist position is not simply related to market positions. Yet, our minimalists cannot easily be equated with Friedmanites. While 112 business leaders agree with profit maximization as a company’s only goal, only 53 respondents clearly reject the statement “companies have to do more for the community than what is required by the law.” Moreover, 23 of these 112 respondents even support a strong role for the state in regulation and redistribution. Hence, we conclude that true adherents of Friedman’s perception of the statecompany division of responsibilities are rare in all three countries.

Etatists, too, are more often to be found in Polish and Hungarian companies than in German firms. Although they represent only 11 percent of the entire sample, it is more than twice as likely that they are from Hungary or Poland than from West Germany. East Germans take a middle position. Like Poles and Hungarians they have a little more minimalists and less corporatists in their ranks compared to West Germans; at the same time, they reject etatist ideas almost as strongly as West Germans do.

The liberal concept of responsibility produced the weakest results. Just 66 respondents agreed with this position; this set of ideas is even less coherent and none of the countries or company categories are significantly more likely to belong in this group. In terms of CSR activities, companies run by adherents of a liberal concept do not perform better than the average of the sample. Neocorporatists, in contrast, are more than twice as likely to perform better.

What is even more striking is the neocorporatists’ optimism regarding the social outcome of the market economy, which distinguishes them from the other groups. Respondents who agree to the statement “free entrepreneurship and social justice are mutually exclusive” are less likely to be neocorporatists and more likely to be minimalists and etatists. Business leaders who consider competition and social justice mutually exclusive are also more often found in the two latter groups. Here we detect strong country effects for Poland and Hungary. In simple percentages, almost 26 percent of the Polish respondents show concerns about the social outcome of the market economy, 18.4 percent of the Hungarians, 10.7 of the East Germans, and only 1.3 percent of the West Germans. This finding indicates that a vast majority of West German business leaders still assume that the “social market economy” actually works.

Studying attitudes, we expected that in addition to objective variables (such as country, size and ownership), respondents’ subjective features would show an effect. Especially age, social origin and the international experience are plausible independent variables. Regarding age, we differentiated between those who started already under the old regimes and those who made their entire managerial career under market conditions, i.e. who were 45 and younger. In 2009/10 the percentage of the “presocialist generation” was still high in Hungary and East Germany, while in Poland more than 60 percent belonged to the “new generation.” Contrary to our expectation, however, the dichotomized variable does not explain the significant variation in concepts of responsibility.

The same holds true for the social origin of the respondents. We classified social origin according to Goldthorpe categories for fathers and mothers, revealing other interesting variations. While more than 50 percent of all three countries’ business leaders stem from the highest social ranks (of the fathers), the percentage in Poland and West Germany is the highest. Yet, also 54.3 percent of the mothers in Poland climbed to the higher social ranks on their own (44.4. percent of the Hungarian mothers but only 13.4 percent of the West Germans).

Comparing the older and younger “generation” the percentage of upperclass fathers increases for the latter (the highest increase is in East Germany, which lags behind the others in this respect, followed by Poland and Hungary). The upper classes across all three countries apparently have better chances of getting top positions in companies, and faster.

The only subjective feature that exerts some explanatory power on the attitudes in question is the internationalization of careers, but in an unexpected way. Business leaders who studied abroad are twice as likely to be minimalists than those who did not, while only Polish respondents who have studied abroad are more likely to be in the liberal group than Germans and Hungarians. International experience is therefore a weak predictor for ideas that are usually associated with CSR.

Conclusion

The ongoing moralization of business has led to a broader understanding of corporate responsibility since privatization in East Central Europe. This change comes from a mainly westerninduced CSR movement, which observers often consider a new “fashion.” One of our Polish interviewees states: “Later it will become an integral part of our entrepreneurial culture, (…) but at first, our handling of CSR is going to be rather superficial.” For it to be a part of business culture, it needs cognitive underpinning. In spite of the limits of a quantitative survey, our findings reveal that many respondents in all three countries lack a clear concept of corporate responsibility, especially in smaller companies. At the same time, we detect national differences that speak against a simple convergence of ideas into one model, due to different experiences and institutional settings. The social reproduction of executives and managing owners from the upper social classes is high in all three countries and social closure is increasing. Differences in this respect can be explained mainly by legacies and ownership structures, and they contribute less to explaining the variation than country and organizational effects do.

Katharina Bluhm

Professor of Sociology at the Institute for East-European Studies, Freie Universität Berlin

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