Transformational Leadership and Business Literature Review

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Corporate social responsibility is a set of business practices, which involve initiatives that benefit society. A firm's corporate social responsibility (CSR), may include a comprehensive array of tactics such as charity donations, implementation of 'greener', environmentally friendly business operations, and community participation. CSR is a way for companies to give back to society that can benefit not just the public, but also the brand and image of the company. Furthermore, it may even help a company's competitive advantage along with improving employee satisfaction. This literature review will highlight a theoretical framework involved in CSR and why CSR can be beneficial to a company's organizational performance.

The influence of corporate social responsibility on organizational performance

Companies engage in CSR for a variety of reasons. From branding strategies to higher levels of public engagement, companies will perform CSR-related activities to meet their needs. A 2012 study attempting to understand company participation in CSR practices, discovered CSR practices may originate from companies that engage in greater transformational leadership. "A large-scale field survey of managers reveals that firms with greater transformational leadership are more likely to engage in institutional CSR practices, whereas transactional leadership is not associated with such practices" (Du, Swaen, Lindgreen, & Sen, 2012, p. 155). Transformational leadership involves leaders working with subordinates to recognize necessary change, generating a vision to direct change via inspiration, and implementing said change in conjunction with dedicate members of a team. If people within a firm decide to adopt a transformational leadership style, they will be more likely to identify potential problems in the company and act accordingly, leading to creation of CSR practices.

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This also lends credence to the idea of social exchange and social identity theory. "Social exchange and social identity theory provide the foundation for predictions that the primary outcomes of CSR initiatives are organizational trust and organizational identification, which in turn affect AOC" (Farooq, Payaud, Merunka, & Valette-Florence, 2013, p. 563). IF CSR practices derive from transformational leadership, and social exchange and identity theory explain the level of trust and identification in such actions, it could explain why companies engaged in higher levels of CSR have employees that are not only more satisfied in their job, but also feel more loyalty to the company. Good examples of companies with high levels of CSR like Google and Apple also have a high level of employee satisfaction and loyalty.

Another article detailing the benefits of CSR and its correlation with organizational structure and performance suggests CSR is associated with better access to bankrolling in nations with weaker credit markets and equity, larger investment and lesser default risk in nations with more restricted business autonomy,….....

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