Corporate social responsibility: Doing well by doing good Oliver Falck 1 , Stephan Heblich ⁎ University of Passau, Innstraβe 27, D-94032, Passau, Germany Abstract Saving the rain forest from yet another palm oil plantation would certainly garner a company favorable attention from environmentalists, but how would its shareholders react? In this article, we show that by strategically practicing corporate social responsibility (CSR), a company can ‘do well by doing good’; in other words, it can make a profit and make the world a better place at the same time. CSR is regarded as voluntary corporate commitment to exceed the explicit and implicit obligations imposed on a company by society's expectations of conventional corporate behavior. Hence, CSR is a way of promoting social trends in order to enhance society's basic order, which we define as consisting of obligations that cover both the legal framework and social conventions. Due to globalization, companies are now less constrained by society's basic order than they have been in the past. Because different countries have different laws and standards, there are more ways to get away with less than ideal behavior in the quest for greater and greater profits. Nearly everyone agrees that this is not a good thing, but what can be done? Via this article, we offer an understanding of CSR that could be the answer. Herein, we contend that practicing CSR is not altruistic do-gooding, but rather a way for both companies and society to prosper. This is especially true when CSR is conceived of as a long-range plan of action. © 2006 Kelley School of Business, Indiana University. All rights reserved. KEYWORDS Corporate social responsibility; Stakeholder; Shareholder; Principal–agent; Society's basic order 1. CSR as win–win strategy Can companies enhance society's basic order, and, if so, is this advantageous for them? With this question in mind, it is the goal of this article to take a closer look at the opportunities and frontiers of a strategic, profit-maximizing use of corporate social responsi- bility (CSR). In doing so, CSR is regarded as voluntary corporate commitment to exceed the explicit and implicit obligations imposed on a company by society's expectations of conventional corporate behavior. Society's basic order consists of both the legal framework and social conventions; it is always a representation of the society's prevailing ideas and opinions. New, emerging social trends cannot pass into society's basic order per se; in fact, they need to be promoted so that they might establish over time. Companies can support this procedure and in doing so, gain profits at the same time. Porter and ⁎ Corresponding author. E-mail addresses: falck@ifo.de (O. Falck), stephan.heblich@uni-passau.de (S. Heblich). 1 Present address: Institute for Economic Research, Poschin- gerstraβe 5, D-81679 Munchen, Germany. www.elsevier.com/locate/bushor 0007-6813/$ - see front matter © 2006 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2006.12.002 Business Horizons (2007) 50, 247–254