Standards between Partial and Complete Organization

Full text

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STANDARDS BETWEEN PARTIAL AND
COMPLETE ORGANIZATION
Cite as:
Rasche, A. & Seidl, D. (2019). Standards Between Partial and Complete
Organization. In G. Ahrne & N. Brunsson (Eds). Organization outside Organizations:
The Abundance of Partial Organization in Social Life. Cambridge/New York:
Cambridge University Press (pp. 39-59).
Andreas Rasche
Copenhagen Business School
CBS Centre for Corporate Social Responsibility (cbsCSR) | Porcelænshaven 18A
DK-2000 Frederiksberg | Denmark
Phone: +45 3815 5701
and
Stockholm School of Economics
Mistra Centre for Sustainable Markets (MISUM)
P.O. Box 6501, SE-113 83 Stockholm, Sweden
Email: ar.msc@cbs.dk
David Seidl (contact author)
Chair of Organization & Management | University of Zurich
Universitaetstrasse 84 | 8006 Zurich | Switzerland
Phone: +41 44 634 37 50
Email: david.seidl@uzh.ch

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Abstract
In this chapter we discuss standards as forms of partial organization. Standards are
defined as decided rules for common and voluntary use. Taking the example of CSR
and corporate governance standards, we show that the degree of partiality of standards
can vary widely – ranging from a single element of organization, i.e. decided rules, to
all five elements of organization, i.e. decided rules, hierarchies, membership,
monitoring and sanctioning. We demonstrate that in some cases partiality is the result
of restrictions in the design of standards, while in other cases it is the result of an
explicit choice. We also demonstrate that the degree of partiality of standards can
change over time, as there are often pressures for standards to adopt additional
organizational elements. Furthermore, we discuss the dispersed nature of many
standards showing how different actors often provide different organizational
elements of standards without any central coordination. We close with an outline of
an agenda for future research.
Andreas Rasche (Dr. rer. pol. EBS Business School) is Professor of Business in
Society at the Centre for Corporate Social Responsibility at Copenhagen Business
School (CBS) and Co-Director of the CBS World-Class Research Environment on
“Governing Responsible Business.” He is also Visiting Professor at Stockholm
School of Economics. He is Associate Editor of Business Ethics Quarterly and joined
Copenhagen Business School from Warwick Business School in 2012. More
information is available at: http://www.arasche.com.
David Seidl (PhD, Cambridge University) is a Professor of Management and
Organization at the Department of Business Administration at the University of
Zurich and is a Research Associate at the Centre for Business Research (CBR) at
Cambridge University. Current research focuses on the dynamics of standardization,
the practices of strategy, the communicative constitution of organization and the
practical relevance of management studies.

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INTRODUCTION
The modern world is increasingly governed by standards. There is hardly any domain
of private or public life that is not affected in one way or another by standards
prescribing particular behaviours or their outcomes (Brunsson & Jacobsson, 2000b;
Timmermans & Epstein, 2010). Standards can be defined as “rule[s] for common and
voluntary use, decided by one or several people or organizations” (Brunsson et al.,
2012: 616). Like laws and norms, standards are rules that are meant for common use;
but unlike laws they are formally voluntary, and unlike norms they are the product of
explicit decisions (Brunsson & Jacobsson, 2000b). Given that many standards are
either produced by organizations (e.g., the International Organization for
Standardization (ISO), industry consortia and governmental regulators) or directed at
organizations (e.g., corporate social responsibility (CSR) standards, corporate
governance codes and accounting standards), standards have long been of central
concern to organization scholars (Egyedi & Blind, 2008; Brunsson & Jacobsson,
2000a). More recently, scholars have drawn attention to the fact that standards not
only constitute input into and output from organizations but can also be considered
forms of organization themselves (Brunsson et al., 2012; Ahrne et al., 2016). Even
though standards might not always possess all elements of a complete organization,
they fulfil at least the minimal definition of organization as being decided orders. As
Ahrne et al. (2016: 96) write: “Standardization is based on decided rules but other
elements of organization are often missing.”
This new perspective on standards as (partial) organization holds great promise, not
least because it allows for the conceptual apparatus of organization analysis to be
applied to standards. The aim of this chapter is to explore the fruitfulness of this new
approach to studying standards. In particular, we will describe how the concept of
partial organization can be applied to standards and what kinds of research questions
this raises. We will illustrate our argument with examples of standards in the area of
CSR and corporate governance, since these kinds of standards are particularly
prominent in the organization studies literature (Aguilera & Cuervo-Cazurra, 2004;
Gilbert et al., 2011; Haxhi & van Ees, 2010; Seidl, 2007). We do not focus on product
or technical standards in our analysis. This is because such standards solve the
problem of coordination through the mere existence of rules and in most cases do not

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allow for deviations from the standard due to its exclusive nature (Farrell & Saloner,
1988). For instance, producing screws that do not comply with existing standards in
this area is close to meaningless, as nobody would buy them. Hence, additional
organizational elements such as sanctioning are often not needed. By contrast, CSR
and corporate governance standards allow for higher degrees of deviation and are also
less exclusive (i.e. competing standards often exist). This makes additional
organizational elements like monitoring and sanctioning more relevant.
The rest of this chapter is structured into six sections. We start by discussing the
different degrees of partiality of standards. We show that standards can range from
extremely partial to (almost) complete organization. After that, we elaborate on the
different reasons for the partiality of standards as organization. We demonstrate that
in some cases partiality is the result of restrictions in the design of standards, while in
other cases it is the result of an explicit choice due to partiality having several distinct
advantages. This is followed by a discussion of possible dynamics between the
partiality and completion of standards. We suggest that there are often pressures for
standards to adopt additional organizational elements, and we also suggest that there
are a number of power struggles and conflicts about whether and which
organizational elements should constitute a standard. After that, we discuss the
dispersed nature of standards as organization. We show how different actors often
provide different organizational elements of standards without any central
coordination, and how this lack of central coordination has several unintended
consequences. We close with a short recapitulation of our argument and an outline of
an agenda for future research.
THE DEGREE OF PARTIALITY OF STANDARDS
Ahrne and Brunsson (2011) view organization as a type of decided social order in
which one or more of the following five organizational elements may exist: rules,
hierarchy, membership, monitoring, and sanctions. Formal organizations possess all
five of these elements and can thus be characterized as ‘complete’ organization: they
usually coordinate their activities by issuing rules about what members of the
organization are expected to do and not to do; they decide who can join the
organization and thus constitute its membership; they assign decision-making
authority to certain individuals and hence create hierarchy (Child, 2005); they also

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often install formal or informal monitoring mechanisms to ensure compliance with the
rules (Weber, 1968); and they also contain some form of sanctioning mechanism
(either positive or negative) to enforce relevant rules. These five elements can be
viewed as the outcome of deliberate decisions. The extent to which they are
implemented in any given formal organization remains an empirical question.
However, organization also exists if one or more of these elements are missing.
Standards, for instance, exist within the environment of formal organizations, but they
still use a number of organizational elements. The main point of departure for
analysing ‘partial’ organization is the insight that “[w]e can find organization not only
within, but also outside and among formal organizations” (Ahrne & Brunsson, 2011:
84).
The distinction between complete and partial organization is not based on a strict
dichotomy. Rather, standards (and other forms of decided orders) differ with regard to
how many elements of organization exist. Some standards have only one element
(rules), while other standards have all organizational elements and thus reflect
complete organization. It can be expected that the degree of partiality of a certain
standard can be the outcome of a deliberate choice of the standard-setter (e.g., to
position the standard vis-à-vis other standards or to respond to criticism from
stakeholders). What characterizes standards as being forms of partial organization is
not the mere existence of a combination of organizational elements but the fact that
these elements have been decided. This makes decision “the most fundamental aspect
of organization” (Ahrne & Brunsson, 2011: 85). In the following, we discuss different
degrees of partiality in the context of CSR and corporate governance standards (see
Table 1 for an overview). We do not assume that the different organizational elements
necessarily build on each other (some may do so, while others do not), and we also
believe that other combinations are possible (e.g., rules, hierarchy, and monitoring).
The combinations depicted in Table 1 should be viewed as reflecting typical examples
that exist in the area of CSR and corporate governance standards.
====================
[Insert Table 1 about here]
====================

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Rules. Some CSR and corporate governance standards contain just one organizational
element, i.e. the rules themselves. For example, in 2000 a group of German
academics, consultants, lawyers and business leaders, the so-called Berlin Initiative
Group, got together and drew up a list of corporate governance rules that they
suggested German corporations should follow. This German Code of Corporate
Governance (GCCG) (http://www.ecgi.org/codes/documents/gccg_e.pdf) contained
recommendations that companies should follow voluntarily. As stated in the preamble
of the Code: “[t]he standards of the GCCG should attain authority through the
voluntary unilateral application by the company” (p. 5); hence the rules were not
linked to any monitoring and sanctioning. Neither did the standard assume any kind
of membership for those companies that followed the Code. In contrast to the
standards discussed in the following section, this standard did not involve either a
hierarchy or a governance mechanism: the initiative was set up as a temporary group
and dissolved after the Code was issued. Even though the standard-setters highlighted
that the rules contained in the Code should be revised over time, they left it open as to
who should be responsible for such revision. Besides such initiatives, we often also
find that individual academics or consultants issue standards in books or articles (e.g.,
Pohl & Tolhurst, 2010; Lipton & Lorsch, 1992) without linking them to any other
elements of organization.
Rules and Hierarchy. In addition to voluntary rules, some standards also contain
hierarchical elements of steering. ‘Hierarchy’ in its general sense refers to the use of
“authority (legitimate power) to create and coordinate a horizontal and vertical
division of labor” (Adler, 2001). In the case of standards, hierarchy indicates the
existence of an explicit governance mechanism (e.g., a Board) that oversees the
creation, maintenance and adoption of the standard. The Global Reporting Initiative
(GRI), for instance, outlines a commonly accepted framework for disclosing social
and environmental information to a firm’s stakeholders (see
www.globalreporting.org). The standard is not based on any explicit membership
mechanisms; rather it is free to use for everybody, and the GRI has no control over
who uses the framework or in what ways it is used. However, the GRI does spell out
clear rules about what ‘good’ reporting means when it comes to disclosing a firm’s
social and environmental performance. It also contains an element of hierarchy, as
there is a Board of Directors and a Stakeholder Council who make centralized

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decisions that are relevant for the GRI as a whole. The lack of membership,
monitoring and sanctioning elements can be interpreted as a deliberate choice by the
standard-setter. After the launch of the first version of the guidelines in 2000, the GRI
was interested in the rapid institutionalization of its standard (Etzion & Ferraro,
2010). The inclusion of membership and monitoring as organizational elements would
have prevented a swift diffusion of the standard, since these elements would have
acted as entry barriers for small- and medium-sized enterprises (SMEs) that often lack
the financial resources to pay for monitoring.
Rules, Hierarchy, and Membership. While the GRI remains ‘open’ in the sense that
there is no control over who uses the rules of the standard, other CSR standards
deliberately add membership as an organizational element. The UN Global Compact,
for example, defines ten principles to which those firms that sign up to the initiative
must publicly commit themselves (see www.unglobalcompact.org). Being a member
of the UN Global Compact comes with certain obligations. The standard expects
behaviour from members that is not expected from non-members. For instance,
standard adopters are asked to annually report on implementation progress. However,
the UN Global Compact does not monitor the behaviour of its members, nor does it
contain any direct sanctioning mechanism in the event of non-compliance with the ten
principles. The Compact’s lack of monitoring and sanctions as organizational
elements has been strongly criticized by NGOs, who argue that members can easily
misuse the standard to ‘bluewash’ their operations, i.e. to wrap their dirty corporate
image in the blue UN flag (Rasche, 2009). However, the absence of monitoring and
sanctioning was an explicit strategic choice on the part of the architect of the UN
Global Compact, former UN Secretary-General Kofi Annan. When launching the
initiative in 2000, Annan knew that, politically speaking, a UN initiative that
monitored and sanctioned private businesses would not find support within the UN
system (Coleman, 2003) and would also not be attractive to smaller firms.
Rules, Hierarchy, Membership, and Monitoring. Some standards use all
organizational elements except sanctions. Launched in 2003, the Equator Principles
reflect a principle-based voluntary risk-management standard for assessing and
managing social and environmental risks in project finance (see http://www.equator-
principles.com). Financial institutions such as banks use the standard. Members must

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follow the ten principles and annually report on compliance. Principle Nine explicitly
demands that participants monitor their compliance with the principles. Monitoring is
not carried out by the standard-setter but rather needs to be organized by participating
organizations (e.g., through the appointment of an independent consultant). This
leaves implementation and monitoring to the discretion and interpretation of each
participant (Goetz, 2013). Currently there is no explicit sanctioning mechanism for
non-compliance (other than public delisting from the initiative). Again the mix of
organizational elements reflects a deliberate decision by the standard-setter. The
inclusion of harsh sanctions as an organizational element (e.g., legal follow-up in
cases of non-compliance) would have lowered the extent of acceptance of the
standard among financial institutions. This argument is backed by the analysis of
Haack, Schoeneborn and Wickert (2012), who argue that “relative ease of adoption
has been arguably conducive to the diffusion of the EPs, although adoption possibly
meant initially professed rather than actual compliance” (p. 837).
Rules, Hierarchy, Membership, Monitoring, and Sanctions. Some CSR standards
contain all five organizational elements and hence could be considered examples of
complete organization. However, it is important to note that in most cases the five
different organizational elements are not performed by a single organizational entity;
rather they are dispersed among several organizations which, as a whole, make up the
standard. Examples of CSR standards that contain all five organizational elements
include the Forest Stewardship Council, Social Accountability 8000, and the Fair
Labor Association. These initiatives are organized in similar ways (see, for example,
Gilbert & Rasche, 2007): they all contain voluntary rules that guide the behaviour of
adopters; they all have centralized decision-making bodies which govern the standard;
and they all differentiate clearly between members and non-members. If firms want to
use these standards they must publicly commit to the relevant rules and, in most
cases, must also pay for being associated with the certification standard. In addition,
they all monitor the compliance levels of adopters through independent audits.
Accredited certification bodies perform the audits, while the standard-setters only
determine the quality criteria that such bodies must meet (Bartley, 2014). Finally, they
all use sanctions to punish members who have violated the rules. Sanctions usually
take the form of revoking certificates and terminating membership.

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REASONS FOR THE PARTIALITY OF STANDARDS
There are various reasons for the partiality of standards as organization. In many
cases this partiality is the result of a deliberate choice by the standard-setters, either
because they do not see (or are unable to see) the need to add other organizational
elements or because they value the particular advantages of partiality (Ahrne et al.,
2016: 94-95).
First, partiality can grant legitimacy to a standard, and especially to the standard-
setter. As Brunsson (2000: 23) writes, “legitimacy is claimed […] for standardization
on the ground that in principle these forms are voluntary.” Standard-setters often do
not occupy accepted positions of authority that would enable them to issue binding
rules for others. In the area of transnational regulation, for example, the regulatory
bodies typically have no formal rights to enforce rules vis-à-vis national states and
their actors (Ahrne & Brunsson, 2006; Kerwer, 2005). Often we also find that
industry consortia (Leiponen, 2008), private initiatives (Gilbert et al., 2011), and
individual actors (Constance & Bonanno, 2000) attempt to set new rules despite
lacking a legal mandate. If the rules were binding, the rule-setting would be
challenged as illegitimate. However, by proclaiming rule-compliance to be voluntary,
i.e. by leaving out any legal sanctioning of non-compliance, the standard-setters can
legitimise their activity (Brunsson, 2000: 23). Standard-setters also typically claim
that the rules are in the interests of those who adopt them and hence need to be
viewed as legitimate and beneficial for users. In this sense, “standardization [without
formal enforcement] may be regarded as a way of regulating in a situation where
there is no legal center of authority” (Jacobsson, 2000: 48). However, even where
such a centre does exist, those who possess formal authority, including states, might
delegate rule-setting to actors who do not possess the same degree of authority
(Brunsson & Jacobsson, 2000: 3). For example, the German government delegated
the development of corporate governance rules to a commission consisting of legal
experts and representatives of the business world (Werder et al., 2005). As Seidl
(2007: 621) observed, issuers of corporate governance codes “emphasize the
voluntariness of the code, arguing that anyone can issue rules as long as they are not
binding (e.g. Ringleb et al., 2004: 51–65).”

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Second, the partiality of standards can also reduce the accountability of standard-
setters for the consequences of the rules they issue. By proclaiming standard-
compliance to be formally voluntary, i.e. by leaving out the sanctioning and often also
the monitoring element, standard-setters can shift accountability for the effects of the
rules to standard-adopters. Adopters thus become the ones who are answerable for the
effects of implementation. As Jacobsson (2000: 46) writes: “The voluntary aspect –
no one is forced to follow a standard – makes it relatively easy for those who draft
standards to disclaim responsibility.” Standard-setters can do this even when the
standards have become de facto binding, for example because third parties, e.g.
consumers, might base their decisions on how to interact with potential standard-
adopters on the degree to which they follow the rules (see our discussion of this point
below). As Kerwer (2005: 622) pointed out, even when standard-followers have no
real choice but to adopt the standard “it will be hard to hold standard setters
accountable because they will deny any responsibility for the fact that their standards
have become compulsory.” For instance, the GRI has developed into the de facto
standard for CSR reporting over the last 15 years. While corporations are often
criticized for producing poor reports (Dennis et al., 2015), the GRI itself is not held
accountable for the quality of these reports, especially since it neither monitors nor
sanctions the use of the standard.
Third, partiality can also increase the plasticity of standards. To the extent that
sanctioning (and possibly also monitoring and membership) is missing, potential
adopters have greater freedom in tailoring the standards to their particular local needs.
Often it is argued that this helps avoid the problem of one-size-fits-all, i.e. the
issuance of rules that need to fit all adopters in the same way. As Rasche (2010a)
showed, deviation from standards’ rules is sometimes unavoidable and even desirable,
since rules can never perfectly regulate all possible local particularities. Plasticity also
makes it easier for standard-setters to devise rules, since they do not have to take into
account all possible circumstances of application. In some cases, standard-setters even
explicitly call for their adopters to consider the idiosyncrasies of their situation when
deciding whether and in which ways to adopt the standards. This is particularly
evident in codes of corporate governance. For example, the official commentary on
the German Corporate Governance Code states that the plasticity of the code:

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is meant to prevent companies affected by the code from being corseted into
too inflexible regulations. Companies should rather have the possibility of
tailoring the modalities of corporate governance to their individual situations
and of optimizing them with regard to efficiency criteria. (Ringleb et al. 2004:
89; our translation).
Fourth, the partiality of standards can also increase their flexibility in the sense of
making it easier to change the underlying rules. It is often argued that a lack of the
elements of monitoring, sanctioning, and membership make it easier and faster for
standard-setters to modify the rules (Ringleb et al., 2004). On the one hand, standard-
setters do not need to be concerned about the consequences of changes to the rules for
the design of monitoring and sanctioning processes and for its membership base. On
the other hand, because formal voluntariness tends to grant legitimacy to standards,
standard-setters are also not so dependent on complex formal processes to legitimise
changes to the rules (Rasche, 2012). This flexibility in changing rules is often one of
the main reasons presented for regulating corporate governance through formally
voluntary standards rather than through binding laws (Gregory, 2003). For example,
the Berlin Initiative Group wrote in the preamble to the German Code of Corporate
Governance that “the formulation of governance principles in a code below the legal
level, offers the advantage of being able to adapt standards more flexibly to altered
conditions and fresh experiences by way of forward projection of the code” (p. 4).
One could also argue that on a more macro level the absence of monitoring, paired
with the absence of hierarchy, facilitates the replacement of one set of standards by
another, since actors who are unhappy with existing standards can issue alternative
standards (Brunsson et al., 2012; Rasche, 2010a). Sometimes we also find that
different standards co-exist so that potential adopters can choose between competing
initiatives rather than changing the standards (Reinecke et al., 2012).
Finally, partiality can also facilitate the diffusion of standards. As we have seen
above, leaving out monitoring and sanctioning elements increases the flexibility of the
standard vis-à-vis the idiosyncrasies of its potential adopters. Such flexibility thus
increases the fit with potential adopters and thereby the potential reach of the standard
(Seidl, 2007). Leaving out monitoring and sanctioning also makes it possible for
potential adopters to experiment with new standards or to adopt them only

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superficially without being held accountable to them. Some studies have shown that
this makes standards more attractive to potential adopters (Haack et al., 2012). To the
extent that a standard-setter is more interested in the diffusion of the standard rather
than its regulatory impact, particularly in the first stages of establishing a new
standard, the fact that standards are only superficially applied might not be of
particular concern. The UN Global Compact, for instance, has deliberately not
included monitoring and sanctioning as organizational elements in order to keep entry
barriers low and to ensure the swift diffusion of the standard. Not requiring
membership might also contribute to increasing the diffusion of a standard. This is
because the introduction of membership requirement limits the reach of a standard to
those who are willing to become members (Ahrne et al, 2000), while relinquishing
membership increases the potential reach of standards. Even though membership
might be open to everybody, the fact that one needs to become a member first means
that greater effort and higher degrees of accountability are involved when adopting
the standard (Rasche & Kell, 2010). Typically, membership-based standards also
require long-term commitment from members to ensure that it is not too easy to enter
and exit membership repeatedly.
THE DYNAMICS OPERATING BETWEEN THE PARTIALITY AND
COMPLETENESS OF STANDARDS
Because standards operate on a continuum between partial and more complete forms
of organization, there are also significant dynamics between both ends of the
continuum. Standard-setters often add organizational elements over time, and they
also have the ability to take away elements if, for example, they want to increase the
diffusion of the standard. We distinguish between two types of dynamics: (a) those
dynamics that occur between different types of organizational elements; and (b) those
dynamics that occur within certain types of organizational elements. Our approach
understands partial organization as a dynamic phenomenon that develops over time.
Dynamics Between Organisational Elements
Standard-setters usually experience pressures to adopt more complete forms of
organization when their own legitimacy is questioned. As indicated above, standard-
setters depend on a high level of perceived legitimacy, since otherwise it would be
difficult for them to convince potential adopters that complying with the standard is

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the right thing to do. The case of the Equator Principles highlights some of the
underlying dynamics (see the more elaborate discussion by Schoeneborn et al., 2012).
The Equator Principles started out as a set of rules without any explicit reference to
other organizational elements. Adopters initially saw the high degree of partiality of
the standard as a clear advantage. Over time, however, the Equator Principles
Association was morally challenged by various NGOs. The analysis undertaken by
Schoeneborn et al. (2012) has shown that this criticism was directly linked to the
absence of certain organizational elements, above all those of clear membership rules
and a hierarchical governance mechanism. Once the Equator Principles Association
realized that these criticisms posed significant constraints on its own legitimacy and
hence its social licence to operate, a strategic review process was initiated to assess
whether the introduction of additional organizational elements would be feasible.
Today, the Equator Principles have a clear membership base, monitoring
requirements, and a certain level of hierarchical steering.
In other cases, standard-setters may deliberately choose to start by including only a
few organizational elements with a view to subsequently ‘ratchetting up’ the standard
by adding certain elements. Working with only a few organizational elements in the
beginning is likely to have a positive influence on adoption behaviour. For instance,
working without monitoring, sanctioning or a clearly defined membership structure
reduces the costs of adoption for interested parties and requires lower levels of
commitment, all of which can positively influence the diffusion of standards. The UN
Global Compact, for example, started out in 2000 as a CSR standard that drew upon
rules, hierarchy and membership as organizational elements. Leaving out monitoring
and sanctioning was a strategic choice. The UN wanted the standard to be somewhat
‘open’ in the sense that it could be adopted by all kinds of firms in all countries and
sectors, as well as in order to meet the UN’s own demand for inclusiveness and
universality (Rasche, 2009). A certifiable standard would have been
counterproductive in this context, since smaller and non-Western firms would have
had to bear significant implementation costs. While these low entry-barriers supported
a quick diffusion of the standard in the early days, from 2003 onwards the Compact
required an annual implementation report from all members. This mandatory report
reflects a kind of self-monitoring by adopters and aims to create higher levels of
transparency (Rasche & Kell, 2010).

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It is also possible for standards to move on a pathway towards more partial
organization (e.g., by excluding certain organizational elements over time). However,
we believe such ‘partialization’ (Schoeneborn et al., 2012) to be rare in practice.
Standards that move in such a direction endanger their perceived legitimacy in the
eyes of external parties (e.g., critical NGOs). The exclusion of certain organizational
elements (e.g., monitoring or sanctions) from a standard is likely to weaken the
enforceability of the underlying rules and hence can result in lower degrees of output
legitimacy (Mena & Palazzo, 2012).
Often there are conflicts as to whether a certain standard should become more or less
partial over time. Different actors prefer different forms of organization, and the final
outcome may not perfectly suit all the actors directly or indirectly involved in setting
up the standard. Conflicts between different parties are particularly likely to arise in
the case of standards that are set up as multi-stakeholder initiatives. For example, a
number of conflicts have arisen in the Forest Stewardship Council (FSC) about the
Council’s underlying rules and about the choice of relevant enforcement practices,
and these conflicts have led to the withdrawal of some NGO supporters from the
standard (Moog, Spicer, & Böhm, 2015). The development of a standard typically
involves struggles over whether certain organizational elements should be added at all
and how certain organizational elements should be defined (e.g., the specificity of the
underlying rules). Schouten and Glasbergen (2012), for example, show how different
organizers in the context of the Roundtable for Sustainable Palm Oil (RSPO) were
unable to agree on how to conceptualize the link between palm oil production and
certain sustainability problems (e.g., poverty). Such conflicts are often an outcome of
the different ideologies of organizers, such as when unions (who are traditionally
sceptical of voluntary CSR) and corporations (who favour non-binding agreements)
meet within the context of a single standard.
Dynamics Within Organizational Elements
It is also possible for the design of certain organizational elements within standards to
change over time and hence create pressures to develop more complete or more
partial organization. Returning to the example of the UN Global Compact’s
mandatory requirement to submit an annual implementation report, this requirement

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was initially implemented in such a way that all submitted reports were simply
acknowledged by the UN as long as they met certain minimum criteria, regardless of
their underlying quality (Rasche et al., 2013). Some of the larger companies that
already had advanced CSR reporting in place and hence submitted more
comprehensive reports than many of the smaller firms started to complain about the
lack of differentiation and the one-size-fits-all approach to reporting. The UN Global
Compact responded to this criticism by introducing a differentiation framework in
2010. This framework placed participants in different categories, i.e. learner, active,
advanced and LEAD, depending on the quality of their report. This example shows
that the standard moved from a rather simple to a more fine-grained and
contextualized model of self-monitoring. This change in monitoring was also
accompanied by a change in membership rules whereby participants could not simply
enter into the LEAD category, even if they fulfilled the formal requirements, but had
to be invited by the Compact. In addition, LEAD participants had to pay a
membership fee, while participants in the other categories could use the standard free-
of-charge. Interestingly, this created a self-selection mechanism, since only rather
large companies with sufficient financial resources could enter the LEAD category.
THE DISPERSED ORGANIZATION OF STANDARDS
As discussed in the preceding sections, standards are often partial to the extent that
they only contain some of the five elements of organization. Beyond this, they are
often also partial in another sense: different organizational actors provide different
elements, without there being any central coordination between these elements. In
other words, standards often represent a dispersed form of organization. Some
scholars speak of so-called third parties (Brunsson and Jacobsson, 2000a), i.e. parties
beyond the standard-setters and standard-followers, who become involved by
providing specific organizational elements. For example, often there is one body that
issues the rules, another that monitors compliance, and a third body that sanctions
deviations from the rules (Kerwer, 2005; Hülsse & Kerwer, 2007).
In some cases, standard-setters explicitly encourage certain actors to contribute other
organizational elements. For example, standard-setters often set up separate
organizations that monitor and certify compliance with the rules. Kerwer (2005: 618)
highlights how “there are private firms, which by auditing and certifying compliance

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with a certain standard, act as a deliberately designed monitoring structure.” Fairtrade
International (FLO) and the Marine Stewardship Council (MSC) both collaborate
with independent certification bodies to monitor compliance with their standards
(Abbott et al., 2017; Auld & Renckens 2017; Loconto 2017). In other cases the
standard-setters expect adopters to monitor their own compliance with the rules (i.e.
self-regulation). For example, the issuers of the German Corporate Governance Code
stress that adopters must publicly declare each year which rules they have followed.
On the website of the Code (http://www.dcgk.de/en/home.html), the issuers write:
“[T]he recommendations and suggestions are not mandatory. However, deviations
from the recommendations – not the suggestions – have to be explained and disclosed
with the annual declaration of conformity (Comply or Explain).” This self-monitoring
function is itself part of statutory law. The sanctioning function, in turn, is expected to
be accomplished by shareholders who are expected to base their decisions on whether
to buy or sell the stocks of the respective company on the degree of a company’s
conformity with the code. As Seidl (2008) writes:
Unjustified deviations from the code provisions are expected to be
‘sanctioned’ through negative share-price reactions. It is assumed that
shareholders will take the level of compliance into consideration when they
make a decision to buy, sell, hold, or vote. Accordingly, unjustified deviations
from code provisions that appear significant to shareholders are expected to
result in lower share prices. (Seidl 2008: 623; see also Gregory, 2003: 68–69)
In this case, the sanctioning itself appears highly dispersed, since the overall sanction,
i.e. the share price reaction, is a result of the decisions of multiple actors.
Actors other than the standard-setter might also add other elements of organization. In
some cases, associations require their members to follow particular standards set by
bodies external to the association, such as when certain industry associations expect
their members to follow particular CSR standards (e.g., the UN Global Compact).
Sometimes we also find that standards’ governance bodies are set up in a way that
they are independent from the actors who issued the standards. Temporary
committees of experts have set up numerous national corporate governance standards.
For instance, the Cadbury Committee was formed temporarily to develop standards

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for corporate governance in the UK (Spira & Slinn, 2013), but it was not part of the
London Stock Exchange as the relevant governing body for the code.
The dispersed nature of organization is particularly relevant in the context of global
governance. Here we witness a rather low degree of decided order (Ahrne &
Brunsson, 2011: 100), since neither nation states (whose jurisdictions are territorially
bound) nor international organizations (who usually depend on nation states for
implementation) can set adequate rules (Scherer et al., 2016). Multinational
corporations (MNCs) often work in a regulatory vacuum, and standards are
increasingly filling this vacuum. The dynamics that exist within and between
organizational elements are helpful in this context because they allow standard-setters
to find the ‘right mix’ of elements when trying to regulate issues across borders.
Regulating social and environmental conditions in global value chains is difficult to
achieve for a single organizational actor. Global standard-setters often collaborate
with local or regional actors (e.g., certification bodies and consultants) in order to
enforce a standard. Some have pointed out that monitoring requires knowledge of the
local business environment as well as customs, traditions and local norms, and that it
is therefore necessary to understand monitoring as a participatory process in which
local and regional actors interact with global standard-setters (Hale & Opondo, 2005).
While standard-setters often specify which organizational actors should provide
additional organizational elements, we sometimes also find that some actors simply
start to provide organizational elements of their own accord and without any
coordination. After the publication of the German Corporate Governance Code, for
example, a financial magazine started monitoring levels of compliance with the rules.
The magazine awarded prizes to those who showed high levels of compliance and
offered a platform for naming and shaming those who deviated significantly from the
code provisions. The UN Global Compact experienced a similar situation. After it
was announced that the standard would require mandatory annual reports from all
adopters but that the UN would not monitor these reports, an alliance of NGOs
decided to publicly expose cases in which participants did not live up to the
underlying rules. This ‘social vetting’ mechanism proved difficult to sustain,
however, as the negative impact of naming and shaming was limited.

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The dispersed organization of standards has both advantages and disadvantages. An
important advantage of separating organizational functions amongst different actors is
the possibility of capitalizing on different competencies. Many standard-setters might
be good at developing rules but might not have the competencies and capacities to
monitor or even sanction deviations from the rules. Monitoring is known to be a
complicated and resource-intensive process that requires expert knowledge and
experience, but standard-setters in the areas of CSR and corporate governance are
often newly created entities lacking financial and non-financial resources as well as
experience. Separating organizational functions among different actors can also
increase the flexibility and responsiveness of standards, particularly when facing
specific local contingencies. For example, by having compliance monitored and
sanctioned by local actors (e.g., by shareholders in the case of corporate governance
codes) the local context can better be taken into account. In addition, dispersed
organization might often be the only way to ensure that other organizational elements
are enacted when the code-issuers themselves lack the necessary formal authority. In
some cases the dispersed organization of standards is also beneficial because there is a
need for actors who provide additional organizational elements to be independent
from the standard-setter. For instance, in order for monitoring to be truly effective it is
important that relevant organizational actors are independent from the standard-setter
and the adopter (Abbott et al., 2016).
There are also disadvantages to the dispersed organization of standards. Most
importantly, dispersed organization often has unintended consequences, to the extent
that the actors who add other organizational elements do not share the same intentions
or understandings as the standard-setters. For example, actors who monitor or
sanction the degree of standard adoption often undermine the intended plasticity of
the rules (Seidl, 2007; Brunsson & Jacobsson, 2000a). The dispersed organization of
standards can thus lead to an uncontrolled drift in the meaning of the underlying rules
(Seidl, 2007). In this respect, Kerwer (2005: 618) writes that dispersed organization
“can result in complex, unplanned control structures”. Separating organizational
elements can also undermine accountability for any consequences – or lack of
consequences – that standards create. Once third parties are involved, it becomes
more difficult to judge which actor can be assigned responsibility for the (lack of)
functioning of a standard. Standards may lack impact because of poor monitoring,

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19
poor sanctioning, and/or poorly defined rules. When organizational elements are
dispersed, it can be difficult to clearly assign accountability. Adding organizational
actors can also make a standard more easily subject to regulatory capture. Adopters
often lobby for the inclusion of third parties (e.g., monitoring organizations) within
the overall organization of a standard. Such inclusion can lead to regulatory capture,
as adopters may find it easier to influence third parties (e.g., to soften rule
implementation) or to use third parties as a channel for recommending rule changes to
the standard-setter (see Abbott et al., 2016).
CONCLUSION
In this chapter we have discussed standards as forms of organization. We have shown
that standards can range from partial to complete organization. In some cases,
standards consist only of a single organizational element, i.e. rules, while in other
cases they include all five organizational elements. We have also highlighted how the
degree of partiality of standards can change over time. Often, standards start out with
very few elements but become more complete over time. However, the opposite
trajectory, whereby standards lose some elements and become less complete again, is
also possible. We have highlighted how standards are also partial in the sense that
different organizational elements can be provided by different actors without any (or
little) central coordination. While the partiality of standards is often seen as
problematic and a result of organizers’ inability to use more organizational elements
(Ahrne & Brunsson, 2011: 93), our discussion shows that the partiality of standards
can be the result of a deliberate design choice, since partiality has several important
advantages.

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20
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TABLES AND FIGURES
Table 1: Degrees of partiality/completeness of CSR and Corporate Governance
Standards
Organisat
ional
Elements
Rules
Rules
Rules
Rules
Rules
Hierarchy
Hierarchy
Hierarchy
Hierarchy
Membership
Membership
Membership
Monitoring
Monitoring
Sanction
Example
German
Code of
Corporate
Governance
(Berlin
Initiative
Group)
Global
Reporting
Initiative
UN Global
Compact
Equator
Principles
Forest
Stewardship
Council