The purpose of socially responsible investing (SRI) is to: (1) allow investors to reflect their personal values and ethics in their choices, and (2) encourage companies to improve their ethical, social, and environmental performance. In order to achieve these ends, the means SRI fund managers employ include the use of negative screening, or the exclusion of companies involved in "sinful" industries. We argue that there are problems with this methodology, both at a theoretical and at a practical level. As a (...) consequence, current SRI offerings cannot accurately reflect the values and ethical beliefs they propose to represent. Moreover, the use of a priori criteria is potentially misleading, as we show by discussing examples of glue and wine making. Applying this flawed approach SRI funds fail to influence the direction of the firms they deem most in need of redirecting. Rather than engaging in the simple a priori assumption that some industries are "saints" while others are "sinners" (Freeman, 2007) we suggest a new framework upon which the SRI screening methodology could be grounded. Embracing the philosophical tradition of American pragmatism, we suggest that SRI methodology could be improved by engaging in an analysis based on (1) the actual impacts of the company's products and services, (2) the company's relationships with its specific, real stakeholders, and (3) the contingent environment (social, economic, political, legal, and cultural) in which the business operates. (shrink)

>With assets of over US$1.0 trillion and growing, public pension funds in the United States have become a major force in the private sector through their holding of equity positions in large publicly traded corporations. More recently, these funds have been expanding their investment strategy by considering a corporations long-term risks on issues such as environmental protection, sustainability, and good corporate citizenship, and how these factors impact a companys long-term performance. Conventional wisdom argues that the fiduciary responsibility of the pension (...) funds trustees must be solely focused on their beneficiaries and, therefore, their investment criteria must be based strictly on narrowly defined financial measures. It is also asserted that well-established financial measurements of corporate performance already include long-term risk assessment through discounted present value of future flow of earnings. Consequently, all other criteria are contrary to the best interest of the pension funds beneficiaries. In this paper, we assert that, contrary to conventional wisdom, pension funds, and for that matter other mutual funds, must be concerned with the long-term survival and growth of corporations. These measures are generally referred to socially responsible investing (SRI) and when applied to corporations, it is termed socially responsible corporate conduct (SRCC). We demonstrate that current measurement of future risk assessment invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias towards short-run on the part of financial intermediaries whose compensation depends greatly on short-term results. Furthermore, there is ample evidence to suggest that these intermediaries have been engaging in self-serving practices and thus failing in their duties to serve their clients, i.e. pension funds, best interests. Because of their large holdings in the total market as well as individual companies, these funds cannot easily divest from poorly performing companies without destabilizing the companies stock and overall markets. Hence, they must opt for a strategy of emphasizing investment criteria that encourage companies to take into account long-term aspects of their operations in terms of their impact on environment, sustainability, and community welfare, to name a few. We argue that an exclusionary, and even a primary, focus on short-term financial criteria is no longer a viable option. It also calls for the pension funds to encourage greater transparency and accountability of the entire corporate sector through improved corporate governance. Thus socially responsible investing practices are not merely discretionary and desirable activities; they are a necessary imperative, which both the corporations and public pension funds, and other large institutional holders, will ignore at serious peril to themselves. Finally, the paper considers some of the recent developments where corporations have been responding to these challenges and how their actions might be strengthened through greater disclosure and transparency of corporate activities. It also makes recommendations for the pension funds to support further research in creating new measurement standards that further refine the concept of socially responsible investing as a necessary ingredient of long-term corporate survival and growth in the context of a changing economic, environmental and socio-political dynamic. (shrink)

As more and more multi-national companies expand their operations globally, their responsibilities extend beyond not only the economic motive of profitability but also other social and environmental factors. The objective of this article is to examine the impact of national culture and geographic environment on firms’ corporate social performance (CSP). Empirical tests are based on a global CSP database of companies from 49 countries. Results show that the Hofstede’s cultural dimensions are significantly associated with CSP. In addition, European companies are (...) found to out-perform other regions and countries in CSP. (shrink)

This study addresses the question whether corporate social responsibility (CSR) matters in Asian Emerging Markets. Based on CSR scores compiled by Credit Lyonnais Securities (Asia), we assess the CSR performance of major Asian firms over a period of 3 years, from 2001 to 2004. The results show that there is a positive and significant relation between CSR and market valuation among Asian firms. We further find that CSR is positively related to the market valuation of the subsequent year. More importantly, (...) Asian firms are rewarded by the market for improving their CSR practice. (shrink)

The concepts of 'ethical' and 'socially responsible' investment (SRI) have become increasingly popular in recent years and funds which offer this kind of investment have attracted many individual inve... merstors. The present book addresses the issue of 'How ought one to invest?' by critically engaging with the ideas of the proponents of this movement about what makes 'ethical' investing ethical. The standard suggestion that ethical investing simply consists in refraining from investing in certain 'morally unacceptable companies' is criticised for being (...) both too rigid (often resting on absolute moral rules which lead to an austere conclusion) and too ineffective for individual investors (investors who after all control only a small part of the investment universe). Furthermore, the idea that ethical investing could consist in engaging more actively with the companies one invests in, in order to make them change their ways and become more socially responsible, is criticised for being just as ineffective for individual investors. Some more radical alternatives are elaborated on and defended - for instance, the suggestion that investors should make as much money from their investments as possible and then donate the proceeds to socially worthwhile charities. From similar suggestions, the common idea that there is no conflict between morality and profitability, or that genuinely ethical investing can be just as profitable as mainstream investing, is criticised for being too naïve. Making a difference may indeed require personal sacrifice of investors, but it is argued that the needs of the possible recipients of philanthropy are morally more important than the luxury of investment returns. (shrink)

This research examines the relationship between corporate social responsibility (CSR) and company stock valuation across three regions of the world. After a brief introduction, the article gives an overview of the evolving definition of CSR as well as a discussion of the ways in which this construct has been operationalized. Presentation of the potential impact of corporate social performance on firm financial performance follows, including investor characteristics, the rationale behind their choices, and their influence on the marketplace for securities worldwide. (...) The unique method used to select socially responsible investments is then provided that also includes a description of the quantitative techniques employed in the analyses. Results are offered subsequently, and the close describes implications for global enterprises as socially responsible investments. (shrink)

As corporations are going global, they are increasingly confronted with human rights challenges. As such, new ways to deal with human rights challenges in corporate operations must be developed as traditional governance mechanisms are not always able to tackle them. This article presents five different views on innovative solutions for the relationships between business and human rights that all build on empowerment, dialogue and constructive engagement. The different approaches highlight an emerging trend toward a more active role for corporations in (...) the protection of human rights. The first examines the need for enhanced dialogue between corporations and their stakeholders. The next three each examine a different facet of empowerment, a critical factor for the respect and protection of human rights: empowerment of the poor, of communities, and of consumers. The final one presents a case study of constructive corporate engagement in Myanmar (Burma). Altogether, these research projects provide insight into the complex relationships between corporate operations and human rights, by highlighting the importance of stakeholder dialogue and empowerment. All the five projects were presented during the Second Swiss Master Class in Corporate Social Responsibility, held in Lausanne, Switzerland on December 12, 2008. The audience for this conference, which examined business and human rights, was composed of researchers, governmental representatives, and business and non-governmental organization practitioners. (shrink)

Crowdfunding platforms have revolutionized entrepreneurial finance, with 200 billion dollars expected to be dispersed annually to entrepreneurs and small business owners by 2020. Despite the importance of this growing phenomenon, our knowledge of the dynamics of successful lending-based prosocial crowdfunding and its implications for the business ethics literature remain limited. We use a social responsibility lens to examine whether crowdfunders on a lending-based prosocial platform lend their money based on altruistic or strategic motives. Our results indicate that the dynamics of (...) prosocial lending-based crowdfunding are somewhat consistent with traditional forms of financing. Specifically, despite a prosocial setting in nature, crowdfunders tend to act strategically, positively responding to signals of quality and low risk. Notably, we also find that projects that are high on both financial and social appeal receive the highest average amount of funding. Furthermore, language on the lender’s profile indicating ability to pay is positively related to both funding success and funding amount. Our study contributes to filling the gap in the business ethics literature about the dynamics of lending-based prosocial crowdfunding, and the strategic and altruistic ethical motives that drive lenders in such endeavors. (shrink)

With assets of over US$1.0 trillion and growing, public pension funds in the United States have become a major force in the private sector through their holding of equity positions in large publicly traded corporations. More recently, these funds have been expanding their investment strategy by considering a corporation's long-term risks on issues such as environmental protection, sustainability, and good corporate citizenship, and how these factors impact a company's long-term performance. Conventional wisdom argues that the fiduciary responsibility of the pension (...) funds' trustees must be solely focused on their beneficiaries and, therefore, their investment criteria must be based strictly on narrowly defined financial measures. It is also asserted that well-established financial measurements of corporate performance already include long-term risk assessment through discounted present value of future flow of earnings. Consequently, all other criteria are contrary to the best interest of the pension funds' beneficiaries. In this paper, we assert that, contrary to conventional wisdom, pension funds, and for that matter other mutual funds, must be concerned with the long-term survival and growth of corporations. These measures are generally referred to "socially responsible investing" and when applied to corporations, it is termed "socially responsible corporate conduct." We demonstrate that current measurement of future risk assessment invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias towards short-run on the part of financial intermediaries whose compensation depends greatly on short-term results. Furthermore, there is ample evidence to suggest that these intermediaries have been engaging in self-serving practices and thus failing in their duties to serve their clients', i.e. pension funds', best interests. Because of their large holdings in the total market as well as individual companies, these funds cannot easily divest from poorly performing companies without destabilizing the companies' stock and overall markets. Hence, they must opt for a strategy of emphasizing investment criteria that encourage companies to take into account long-term aspects of their operations in terms of their impact on environment, sustainability, and community welfare, to name a few. We argue that an exclusionary, and even a primary, focus on short-term financial criteria is no longer a viable option. It also calls for the pension funds to encourage greater transparency and accountability of the entire corporate sector through improved corporate governance. Thus socially responsible investing practices are not merely discretionary and desirable activities; they are a necessary imperative, which both the corporations and public pension funds, and other large institutional holders, will ignore at serious peril to themselves. Finally, the paper considers some of the recent developments where corporations have been responding to these challenges and how their actions might be strengthened through greater disclosure and transparency of corporate activities. It also makes recommendations for the pension funds to support further research in creating new measurement standards that further refine the concept of socially responsible investing as a necessary ingredient of long-term corporate survival and growth in the context of a changing economic, environmental and socio-political dynamic. (shrink)