Do Your Own Homework

Do Your Own Homework-40
Managers overcome this information asymmetry by participating in ISR schemes to signal their firm’s social performance.

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Despite theoretical and practical enthusiasm for ISR, questions remain about its legitimacy.

Mounting empirical evidence suggests that all too often industry-led schemes do not lead to positive social benefits or fix the problems that they are designed to solve (King et al. Recent scandals on mislabelled horsemeat in food supply chains, privacy in the self-regulated newspaper industry, and the fatal collapse of the BSCI-certified Rana Plaza factory in Bangladesh have fed popular scepticism that ISR is tantamount to firms “marking their own homework”.

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When is industry self-regulation (ISR) a legitimate form of governance?

It maps what we know about the legitimacy of ISR schemes from management theory, shows where previous research from different traditions has focused, and uses this to explore blind spots, tensions and future directions on the legitimacy of ISR.

Explaining how and why the evaluation of ISR schemes differs so much between theorists is a vital step towards improving the performance of ISR schemes in practice.

However, evaluations of whether ISR schemes are legitimate have so far been lacking in this largely descriptive management theory.

If legitimacy is considered at all, management theory usually focuses on ) framework and separates the pragmatic legitimacy of ISR based on self-interested calculations, from moral legitimacy based on normative approval.

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