Understanding the Conceptual Evolutionary Path and Theoretical Underpinnings of Corporate Social Responsibility and Corporate Sustainability

To unlock the potential for corporations to play a more proactive role in sustainable development, it is critical to have a fundamental understanding of the pathways leading to a responsible and sustainable business. This study explores contributions of theories of the firm in explicating why and how integrating corporate social responsibility (CSR) and corporate sustainability (CS) into business strategic decisions and operation processes helps to improve the viability of corporations. The research objective is addressed through a narrative review of relevant literature by following the developmental and evolutionary sequences in business responsibility and sustainability while contemplating the connections between CSR and CS through the lens of the dominant theoretical perspectives underpinning the concepts. The study posits an integrative theoretical framework that offers supports for embedding CSR and CS into a corporate business strategy. It discusses that corporate choice of CSR and CS actions and policies is supported by dual internal and external mechanisms based on resource-based theory and institutional theory. This is to meet the interests and expectations of internal and external stakeholders, the basis upon which stakeholder theory is constructed. Findings from this review corroborate the proposition that the three theories of resource-based, institutional, and stakeholder could be used as the primary approach to explain corporate recognition of the need for CSR and CS, and further build a coherent platform to support corporate choice and adoption of CSR and CS in business strategy.

Debt Policy and Corporate Choice of Organizational Form

Corporate income is taxed twice, once at the entity level and then taxed once again at the shareholder level. In addition, the corporate tax system favors debt over equity financing of capital expenditures; corporations are able to deduct interest on borrowed funds, unlike the return to equity. By excessive borrowing, corporations are able to reduce the burden of double taxation. In contrast, noncorporate entities such as S corporations and partnerships are only taxed once at the shareholder level. Switching their organizational form, say from C to S corporate status, allows firms to engage in a form of self-help integration and avoid double taxation. But do C corporations that switch their organizational form to the S status less leveraged? The evidence suggests that they do, albeit modestly, and may provide further support to the incentive effects of taxes on debt policy.