ABSTRACT:The purpose of this paper is to critically evaluate the instrumental perspective on Corporate Social Responsibility (CSR) in practice and theory by relying on sociological analyses of a well known organization: the Italian Mafia. Legal businesses might share features of the Mafia, such as the propensity to exploit a governance vacuum in society, a strong organizational identity that demarcates the inside from the outside, and an extreme profit motive. Instrumental CSR practices have the power to accelerate a firm's transition to (...) Mafia status through its own pathologies. The boundaries of such instrumentalism are explored and lessons for future CSR research derived, with specific emphasis on a firm's social and normative embeddedness, taking into account the inherent challenge of regulating corporate behaviour in the global economy. (shrink)

This article examines whether ethical business practice enhances financial performance with respect to interorganizational favour exchange. We argue that the link between the ethicality and economic utility of interorganizational favour exchange is governed by: (1) organizational–individual interest alignment/conflict and (2) the fairness or justifiability of favour exchanges from the perspective of third parties. We classify interorganizational (IO) favour exchange into four types (Business–Personal, Personal–Business, Personal–Personal and Business–Business favour exchange). Our analysis shows that the first three types of favour exchange are (...) unethical as they involve conflicts between organizational and individual interests in one or both participating organizations that negatively affect organizational value creation. The last type of favour exchange involves organizational–individual interest alignment in both participating organizations and positively affects the capacity of those involved in the exchange to create value. Favour exchanges of this fourth variety are ethically justifiable unless they unfairly damage the legitimate interests of third parties. In the latter case, these favour exchanges create the risk of negative third party reactions, which in turn affect the sustainability of the benefits of the favour exchanges to the focal group (the dyad). Our research results advance understanding of the ethical and economic implications of IO favour exchange, counter the prejudice against this behaviour in organizations, provide ethical guidance for management and business practice, and have implications for the relationship between doing well and doing good. (shrink)

Stakeholder theory is one of the most influential theories in business ethics. It is perhaps not surprising that a theory as popular as stakeholder theory should be used in different ways, but when the disparity between different uses becomes too great, it is questionable whether all the ‘stakeholder research’ refers to the same underlying theory. This paper starts to clarify this definitional confusion by distinguishing between three different ways in which different lines of stakeholder research are connected with descriptive and (...) instrumental stakeholder theory. First, a distinction is made between research connected with descriptive and with instrumental stakeholder theory as defined by Donaldson & Preston in the narrow or broad sense. Second, a distinction is made between research that interprets descriptive and instrumental stakeholder theories as either hypotheses or research areas. Third, a distinction is made between research that interprets Donaldson & Preston’s central concept of ‘stakeholder management’ as either behaviour or rationale. Finally, the paper discusses the implications of these differences for empirical research into stakeholder theory. (shrink)

In academic research, many attempts have been undertaken to legitimize corporate community involvement by showing a business case for it. However, much less attention has been devoted to building understanding about the actual dynamics and challenges of managing CCI in the business context. As an alternative to existing predominantly static and top-down approaches, this paper introduces a social movement framework for analyzing CCI management. Based on the analysis of qualitative case study data, we argue that the active role of employees (...) pressuring for CCI policies and practices, as well as the organization audience responses to their efforts, are at the core of the challenges involved in managing CCI. These challenges also pose limits to how far CCI can be extended to a “business as usual” activity. (shrink)

The importance of communicating corporate social responsibility (CSR) not only to socially responsible investors but also to the mainstream of the financial community is gaining importance in a more competitive capital market environment. This article looks at how equity analysts at the German stock exchange in Frankfurt – individuals who are not particularly involved in socially responsible investment (SRI) research – perceive economic, legal, ethical and philanthropic responsibility strategies. The evidence obtained in our interviews suggests that responsibility issues are increasingly (...) becoming part of mainstream investment analysis. However, for them to play a larger part in the future, investor relations personnel must frame responsibility strategies in a way that is more consistent with the financial community's perspective. In particular, the impact of CSR measures on strategic development, competitive anticipation and creating trust with stakeholders are key in leveraging CSR in financial communications. (shrink)

The importance of communicating corporate social responsibility (CSR) not only to socially responsible investors but also to the mainstream of the financial community is gaining importance in a more competitive capital market environment. This article looks at how equity analysts at the German stock exchange in Frankfurt – individuals who are not particularly involved in socially responsible investment (SRI) research – perceive economic, legal, ethical and philanthropic responsibility strategies. The evidence obtained in our interviews suggests that responsibility issues are increasingly (...) becoming part of mainstream investment analysis. However, for them to play a larger part in the future, investor relations personnel must frame responsibility strategies in a way that is more consistent with the financial community's perspective. In particular, the impact of CSR measures on strategic development, competitive anticipation and creating trust with stakeholders are key in leveraging CSR in financial communications. (shrink)

ABSTRACT:This essay attempts to provide a useful research agenda for researchers in both strategic managementandbusiness ethics. We motivate this agenda by suggesting that the two fields started with similar interests, diverged, and are beginning to converge again. We then identify several streams that hold particular promise for developing our understanding of the relationship between strategy and ethics: stakeholder theory, managerial discretion, behavioral strategy, strategy as practice, and environmental sustainability.

ABSTRACT:This essay attempts to provide a useful research agenda for researchers in both strategic managementandbusiness ethics. We motivate this agenda by suggesting that the two fields started with similar interests, diverged, and are beginning to converge again. We then identify several streams that hold particular promise for developing our understanding of the relationship between strategy and ethics: stakeholder theory, managerial discretion, behavioral strategy, strategy as practice, and environmental sustainability.

Boards of directors affect corporate strategy and decision-making through monitoring of management and resource provision. Recently, an increasing number of studies have examined the relationships between board characteristics and corporate social responsibility (CSR). These studies have yielded inconsistent findings. This article therefore reports the results of a study applying meta-analytical techniques to a sample of 82 empirical studies to help clarify the relationships between board characteristics and CSR. Although prior research has tended to apply relatively simplistic models investigating the impact (...) of individual board characteristics independently and only directly, we adopt a more complex perspective to shed new light on the board characteristics–CSR nexus. Specifically, we use a meta-analytic path model that accounts for the potential interplay between board characteristics in determining CSR and tests whether the presence of a CSR committee plays a meditating role. Our findings suggest that board size, board independence, and female board representation are partially interrelated with each other and jointly influence CSR directly as well as indirectly via the presence of a CSR committee. In addition, we find that country-level institutional factors act as moderators and that the relationships differ with regard to the specific dimension of CSR (i.e., social, environmental, or aggregate). (shrink)

Based on the literature on stakeholder management and family firm dynamics, this research analyses the relationship between three constructs: the identification of business families with their family firms, FFs’ orientation toward key non-family stakeholders, and the achievement of better economic performance. Data analyses from 374 family and non-family members of 173 Spanish FFs show that a high level of family identification with their firms affects the orientation of FFs toward key non-family stakeholders in setting corporate goals and that this orientation (...) will lead to higher economic performance only when it is built on family identification with the firm. Our results also show that the significance of both relationships changes with the degree of family involvement in the management of the FF. (shrink)

The evidence for a positive, direct link between the representation of women on boards of directors and financial performance is tenuous. Given the importance of the gender diversity–financial performance debate, researchers are left to examine how, if at all, the two are linked. The present study takes the position that the link is indirect. Specifically, following stakeholder theory, an argument is made that women on boards’ attunement to stakeholder interests leads them to influence firms’ prosocial actions, which results in higher (...) levels of corporate social responsibility. In turn, following the extant literature, CSR is expected to be positively linked to financial performance. Relying on a sample of Australia’s largest publicly traded firms, the results demonstrate that women on boards are linked to CSR and that CSR is linked to financial performance. However, in the mediation test, CSR appears to fully mediate the link between women on boards and financial performance. The results are discussed along with limitations and future research directions. (shrink)

This study examines the effect of integrating sustainability into corporate strategy on various aspects of shareholder value creation and financial performance in the British capital market. The employed method is based on the content analysis of corporate disclosures and a new technique for assessing the adoption of the corporate sustainability concept. Using extensive data of FTSE 350 firms covering the years 2006–2012, 65 companies were selected as meeting corporate sustainability criteria. For the above period, we find that these firms were (...) characterized by higher financial risk exposure, lower asset growth rates, lower BV/MV ratios, lower EVA ratios, and higher MVA ratios. Such relations were generally present among different size and industry groupings. The results support the thesis that firms that incorporate sustainability issues into their business operations are better able to leverage their resources toward stronger financial performance and shareholder value creation than other companies. The paper contributes to the literature by offering a more holistic approach to corporate sustainable performance measurement and shedding additional light on its relation to financial performance in the context of the recent global financial crisis and its direct aftermath. (shrink)

Social reporting has become an increasingly important dimension of the corporate social responsibility process. The growing necessity to include the social dimension in reporting practices raises important questions about the nature of social responsibility and its impact on corporate and individual behaviour and performance. The literature has yet to provide a reliable theoretical definition of corporate social responsibility and performance, however. Based on the approach proposed by Simons, we argue that organisational reporting about social responsibility can be viewed as a (...) learning tool in some instances. Under this view the design and implementation of corporate social reporting procedures may lead to individual and organisational dynamic changes that foster organisational performance. Research propositions are then derived from the analysis. (shrink)

Do firms respond to changes in economic growth by altering their corporate social responsibility programs? If they do respond, are their responses simply neglect of areas associated with corporate social performance or do they also cut back on positive programs such as profit sharing, public/private housing programs, or charitable contributions? In this paper, we argue that because CSP-related actions and programs tend to be discretionary, they are likely to receive less attention during tough economic times, a result of cost-cutting efforts. (...) However, the various CSP performance areas vary in terms of their resource requirements and their influence on financial performance, which suggests that firms may respond differently depending on area. Consequently, in addition to examining CSP concerns separately from positive actions and programs, we also examine the influence of economic growth across the five areas of diversity, employee relations, the environment, product quality/safety, and the community. Based on data from 837 firms over 15 years, our results suggest that firms neglect some areas associated with CSP during economic downturns, resulting in increased concerns about community and employee relations, product safety/quality, and the environment. However, this relationship does not apply to positive actions and programs. Instead, firms tend to increase their positive CSP programs in areas such as diversity, employee relations, and the environment during periods of slow economic growth and reduce them when the economy picks up. We offer potential explanations for our findings and discuss their importance to research on CSP. (shrink)

Although interest in Corporate Social Responsibility (CSR) in emerging markets has increased in recent years, most research still focuses on developed countries. The scant literature on the topic, which traditionally suggested that CSR was relatively underdeveloped in emerging markets, has recently explored the context specificity, suggesting that it is different and reflects the specific social and political background. This would particularly apply to local companies, not so much to foreign subsidiaries of multinationals active in emerging markets. Thus far, empirical research (...) that systematically documents a range of CSR activities of local companies and their performance has been scarce. This paper reports the results of a survey conducted among companies in the Mexican auto industry. CSR performance was investigated across three dimensions: environmental, labor, and community, using measures from existing research and global, ' Western' standards of practice, to identify the type of CSR activities and the level of CSR performance that exists, if at all, in the emerging-market context. Results show that local companies do engage in the type of CSR activities commonly associated with CSR in developed countries. To the extent that comparisons could be made, our findings also indicate that CSR activities and levels among the sample are comparable to what is known about CSR in developed-country settings. Moreover, six of the nine CSR dimensions are intercorrelated, which suggests that CSR in the Mexican auto parts industry is more structural than incidental. (shrink)

Rowley and Berman (2000) are tackling the right questions in their article. Three critical questions, in essence, are asked: What is corporate social performance (CSP)? What does it mean (i.e., CSP measures)? And, where does the future lie with CSP? In answering these questions, they are creating a CSP research agenda for the 21st Century. While agreeing, to a large extent, with their new set of questions, this paper questions their rationale for what is currently wrong with CSP and focuses (...) on extending future research directions. Specifically, this paper suggests that existing research in related disciplines can help accelerate our understanding of CSP. Marketing (i.e., customer-organization relations) and human relations (i.e., employee-organization relations) literatures, for example, already critically examine the conditions under which various organizational practices, policies, and procedures flourish. These boundary spanning functions provide newinsights that can lead to a broader, richer, and more systematic understanding of the complex CSP construct. (shrink)

This study investigates financial correlates of corporate philanthropy in Fortune 1000 companies using structural equation modeling. The results suggest that cash flow (one of the most discretionary types of organizational slack) has a significant impact on a firm’s cash donations to charitable causes, but monetary donations do not affect firm financial performance. These findings support the accepted view of corporate philanthropy as a discretionary social responsibility and the traditional thinking about firm giving in the business and society literature—that doing well (...) enables doing good. Contrary to some contemporary thinking, the findings imply no significant effect on profits from corporate generosity. (shrink)

Milton Friedman famously stated that the only social responsibility of business is to increase its profits, a position now known as the shareholder model of business. Subsequently, the stakeholder model, associated with Edward Freeman, has been widely seen as a heuristically stronger theory of the responsibilities of the firm to the society in which it is situated. Friedman’s position, nevertheless, has retained currency among many business thinkers. In this article, we argue that Friedman’s economic writings assume an economy in which (...) businesses operate under the protections of limited liability, which allows corporations to privatize their gains while externalizing their losses. By accepting limited liability, Friedman must also accept a view of business as embedded in social interdependency, which serves as the logical and moral foundation for corporate social responsibility (CSR). To achieve consistency with his economic principles, Friedman must either abandon limited liability or modify his doctrine on CSR and his related shareholder model of business. (shrink)

Addressing ESG issues has become a point of interest for investors, shareholders, and governments as a risk management concern, while for firms it has become an emerging part of competitive strategy. In this study, a database from an independent ratings agency is used to examine, longitudinally, how Australian Securities Exchange (ASX) 300 firms are responding to ESG issues. Following institutional theory predictions, ASX300 firms are improving ESG performance over the 2002–2009 timeframe. Furthermore, over this timeframe, performance on the governance dimension (...) improved at a greater rate than environmental or social performance, as predicted. Lastly, high impact industries are predicted to demonstrate overall improved ESG performance relative to medium or low impact industries over the timeframe, but this hypothesis was not confirmed. Results are discussed along with implications and future research directions. (shrink)

Since Ackerman in Corporate social responsiveness, the modern dilemma (1973), pleaded for the institutionalisation of corporate social performance (CSP) in business processes, researchers have focused on the role of strategy in CSP. This article demonstrates that CSP is institutionalised within the governance structure. We will attempt to make this clear by means of a description of the Dutch system of corporate governance. Under certain circumstances Dutch companies are already bound to CSP due to prevailing legislation. A governance perspective shows that (...) CSP is institutionalised within a company’s governance structure. “Processes of responsiveness”, since long regarded as a starting point of CSP-analysis, appear to be decision-making processes. Within these processes the expectations of the stakeholders can be institutionalised, trust can be built and interests can be incorporated. This makes CSP context-dependent. However, it is possible to analyse companies by comparing the companies’ individual governance structures. The article concludes that CSP-analysis can fruitfully extend into analysing in the role of the stakeholders in the influence-pathways that are incorporated within the governance structure. (shrink)

Since Ackerman in Corporate social responsiveness, the modern dilemma (1973), pleaded for the institutionalisation of corporate social performance (CSP) in business processes, researchers have focused on the role of strategy in CSP. This article demonstrates that CSP is institutionalised within the governance structure. We will attempt to make this clear by means of a description of the Dutch system of corporate governance. Under certain circumstances Dutch companies are already bound to CSP due to prevailing legislation. A governance perspective shows that (...) CSP is institutionalised within a company's governance structure. "Processes of responsiveness", since long regarded as a starting point of CSP-analysis, appear to be decision-making processes. Within these processes the expectations of the stakeholders can be institutionalised, trust can be built and interests can be incorporated. This makes CSP context-dependent. However, it is possible to analyse companies by comparing the companies' individual governance structures. The article concludes that CSP-analysis can fruitfully extend into analysing in the role of the stakeholders in the influence-pathways that are incorporated within the governance structure. (shrink)

This study examines whether and how female board directors may affect corporate social performance (CSP) by drawing on social role theory and feminist ethics literature. The empirical analysis, based on a sample of 126 firms drawn from the S&P500 group of companies over a 5-year period, suggests that board gender diversity (BGD) significantly affects CSP. However, this impact depends on the social performance metric under investigation. In particular, more gender diverse boards exert stronger influence on CSP metrics focusing on ‘negative’ (...) business practices, such as the ‘concerns’ dimension of the Kinder Lydenberg Domini, Inc. (KLD) ratings. This is because such CSP ratings have the potential to induce higher levels of ‘empathic caring’, which strongly appeals to female directors. Hence, this study reveals further hidden connections in the BGD–CSP link which have important implications for managers, nongovernmental organisations and socially responsible investors. (shrink)

This study complements previous empirical research on the business case for corporate social responsibility (CSR) by employing hitherto unused data on corporate social performance (CSP) and proposing statistical analyses to account for bi-directional causality between social and financial performance. By allowing for differences in the importance of single components of CSP between industries, the data in this study overcome certain limitations of the databases used in earlier studies. The econometrics employed offer a rigorous way of addressing the problem of endogeneity (...) due to simultaneous causality. Although the study’s results provide no evidence that there is a generic or universal business case for CSR, they indicate that there is a strong link between single stakeholder-related issues of CSR and financial performance. However, the analysis does not establish causality within these relationships. (shrink)

This article introduces a theoretical framework that combines institutional and stakeholder theories to explain how firms choose their corporate social responsibility (CSR) strategy. Organizational researchers have identified several distinct CSR strategies (e.g., obstructionist, defensive, accommodative, and proactive), but did not explain the sources of divergence. This article argues that the divergence comes from the variability in the configuration of external influences that consists of institutional and stakeholder pressures. While institutions affect firms’ social behavior by shaping the macro-level incentive structure and (...) sources of legitimacy (distal mechanisms), firms’ stakeholders can amplify or buffer the institutional forces by acting as mediators (proximate mechanisms). The two dimensions are interdependent in that stakeholders draw legitimacy and power from institutions, and institutions are often actualized through stakeholder mechanisms. Together, they form a particular configuration of external influences that shapes how focal firms construct their CSR strategy. (shrink)

Prior research suggests that ownership structure is associated to corporate social responsibility (CSR) in developed countries. This article examines whether and how ownership structure affects CSR in emerging markets using Chinese firms' social responsibility ranking. Our empirical evidences show that for non-state-owned firms, corporate ownership dispersion is positively associated to CSR. However, for state-owned firms, whose controlling shareholder is the state, this relation is reversed. We attribute the reversed relationship to political interferences and further test this hypothesis by demonstrating that (...) regional economic development is negatively related to CSR for state-owned firms due to decreased political interference in more developed areas. This study is the first to directly examine the relationship between the dispersion of corporate ownership and CSR in emerging markets, and our results depict that it is important to consider ownership type in assessing CSR in emerging market where state ownership is still prevalent such as China. The results also reveal that firm size, profitability, employee power, leverage, and growth opportunity affect CSR in China. (shrink)

This article furthers the argument for a stakeholder theory that integrates into managerial decision-making the relationship between business organizations and the natural environment. The authors review the literature on stakeholder theory and the debate over whom or what should count as a stakeholder. The authors also critique and expand the stakeholder identification and salience model developed by Mitchell and Wood (1997) by reconceptualizing the stakeholder attributes of power, legitimacy, and urgency, as well as by developing a fourth stakeholder attribute: proximity. (...) In this way, the authors provide a stronger basis for arguing for the salience of the natural environment as the primary and primordial stakeholder of the firm. (shrink)

For several decades, business has operated according to the tenets of neoclassical economic theory, where the primary obligation of corporations is to maximize profit for shareholders. However, the larger social mandate for business has changed, represented by the rise of language such as "sustainable development", "corporate social responsibility" (CSR) and "stakeholder groups." Nevertheless, the theoretical shift implied by the use of such language has not occurred. Issues of sustainable development and CSR continue to be justified in the terms of neoclassical (...) economic theory through the rationalization of "doing well by doing good".Within this economic paradigm, CSR cannot move beyond enlightened self-interest (acting in socially responsible ways in order to further one''s own ends) because all behavior must be justified economically. This implies that corporate socially responsible behavior will simply cease when it becomes uneconomic, regardless of the impact on interrelated systems which in turn will re-impact the business realm. (shrink)

Do unobservable CEO characteristics predict corporate social performance and are they significantly correlated with CEO compensation? How meaningful is stock-based CEO compensation as a predictor of CSP? To answer these questions, the author empirically examines the relationship between stock-based CEO compensation and CSP while accounting for unobservable CEO characteristics. This study finds that CEO fixed effects account for a significant variance in CSP and that these fixed effects are correlated with CEO compensation variables in a statistically significant manner. The findings (...) suggest that unobservable CEO characteristics should be accounted for when examining the effect of CEO compensation variables on CSP. The findings also highlight the usefulness of stock-based compensation instruments for shareholders and other stakeholders who care about CSP and intend to promote CEO attention to social and ethical issues. (shrink)

Many writers have commented on the heterogeneity of the socially responsible investment (SRI) movement. However, few have actually tried to understand and explain it, and even fewer have discussed whether the opposite – standardisation – is possible and desirable. In this article, we take a broader perspective on the issue of the heterogeneity of SRI. We distinguish between four levels on which heterogeneity can be found: the terminological, definitional, strategic and practical. Whilst there is much talk about the definitional ambiguities (...) of SRI, we suggest that there is actually some agreement on the definitional level. There are at least three explanations which we suggest can account for the heterogeneity on the other levels: cultural and ideological differences between different regions, differences in values, norms and ideology between various SRI stakeholders, and the market setting of SRI. Discussing the implications of the three explanations for the SRI market, we suggest that there is reason to be sceptical about the possibilities of standardisation if not standardisation is imposed top-down. Whether this kind of standardisation is desirable or not, we argue, depends on what the motives for it would be. To the extent that standardisation may facilitate the mainstreaming of SRI, it could be a good thing – but we entertain doubts about whether mainstreaming really requires standardisation. (shrink)

This study adds two new perspectives to the long-running debate regarding the linkage between corporate social performance (CSP) and corporate financial performance (CFP): First, we add the aspect of issue materiality and suggest research to put more emphasis on the question of how individual CSP issues can be assumed to systematically influence the business environment from a theoretical point of view. Second, we highlight the measurement level of the underlying data screens as an important determinant of the actual effects of (...) CSP on CFP. Focusing on climate change, we developed a set of questions that cover a firm’s carbon emissions and carbon management strategies. These questions were included in a questionnaire sent out annually to the 2,500 largest companies by market cap within the Dow Jones Global Index by an independent Swiss-based asset management firm. Our results show that when using carbon emissions as an outcome-based measurement, corporate environmental performance pays off. Conversely, when using carbon management as a process-based measurement, we find a negative relationship between corporate environmental performance and CFP. (shrink)

In this paper, we seek to answer two questions: (1) what does boardroom diversity stand for in the strategic management literature? And, (2) is there a significant relationship between boardroom diversity and corporate social performance. We first clarify the boardroom diversity concept, distinguishing between a structural diversity of boards and a demographic diversity in boards, and then we investigate its possible linkage to social performance in a sample of S&P500 firms. We find a significant relationship between diversity in boards and (...) social performance. This relationship is moderated by diversity of boards. Our results also reveal the effects of the specific variables that make up the diversity of boards and diversity in boards constructs. In particular, gender, and age have a significant effect on corporate social performance. Some important measurement issues are raised and discussed. (shrink)

This article examines the impact of female leadership on corporate social responsibility (CSR) practices in publicly traded corporations. Our analysis finds that female leadership matters. For example, female leadership at the board level increases the likelihood of having a female CEO and the overall percentage of women executives in firms. The study measures CSR practices using the Thomson Reuters corporate responsibility ratings (TRCRR) from the Thomson Reuters ASSET4 database for 1242 firms over a 7-year period, from 2009 to 2015. Panel (...) regression estimates indicate that board gender diversity (BGD) has a positive impact on CSR, while two other measures of female leadership (presence of female CEO and percentage of female executives) were largely insignificant. We perform our analysis in the context of upper echelons theory and expand on recent studies of the impact of female leadership on CSR practices by using a different and a larger data set than previous research studies. (shrink)

Will stakeholder theory continue to transform how we think about business and society? On the occasion of this journal’s 60th anniversary, this review article examines the journal’s role in shaping stakeholder theory to date and suggests that it still has transformative potential. We conducted a bibliometric analysis of co-citations in the literature from 1984 to 2020. Reporting these results, we examine the field’s evolving structure. Contextualized theoretically as an accomplishment of institutional work—the creation of a meaningful and innovative field ideology—this (...) structure is remarkable for how it integrates ethical and behavioral arguments, invites engagement from adjacent domains, and arrives at important insights for business and society. We advance a research agenda consistent with this larger institutional project. (shrink)

The vast majority of extant empirical research examining the relationship between corporate social performance and financial performance selects samples of only those firms which are observed engaging in CSP. In this study, the authors assert that firms’ efforts to pursue CSP and subsequently their appearance in social-choice investment advisory firms’ ranking databases are non-random. Studying the CSP–FP link using selected samples of only those firms whose social performance is ranked by SIA firms introduces a sample-selection bias which limits generalization of (...) results to a population of all firms, and at worst provides alternate explanations for observed relationships. The authors test these assertions on a large sample of public corporations in the United States over 6 years and find a sample-selection bias. Upon correction of this bias, this study confirms the positive impact of CSP on FP. (shrink)

This paper examines the philosophical basis for the argument that there is a connection between ethical behavior and profitability. Both sides of this argument – that good ethics is good business and that bad ethics is bad business – are explored. The possibility of a moral floor above which ethical behavior is not rewarded is considered, and an economic experiment testing such a proposition is discussed. Johnson & Johnson suffers a potentially devastating blow when some cyanide-laced Tylenol capsules cause several (...) deaths. Johnson & Johnson voluntarily pulls Tylenol off the shelf, to universal acclaim. When Tylenol is returned to the marketplace, its share of the over-the-counter painkiller market becomes greater than it was before the tragedy. Arthur Andersen, the venerable accounting firm, is caught in the web surrounding the downfall of Enron, Inc. As Enron’s various sins are discovered, it is found that Arthur Andersen auditors had signed off on flawed audits and had shredded documents to cover themselves. Andersen is prosecuted for, and convicted of, obstructing justice (although the conviction is later overturned). Today the firm barely exists and has no resemblance to the Big Five accounting giant of 1999. These stories seem to indicate that ethical (or unethical) behavior leads to positive (or negative) financial results. But the philosophical arguments underpinning such statements are seldom subjected to proper analysis. They are perhaps wishful thinking, or perhaps based on examples such as the above without considering other examples that may reinforce a contrary position. This paper will explore the philosophical arguments and empirical evidence regarding these statements and state some research questions for exploration in this area. In particular we will propose the possibility that a moral floor exists above which firms that engage in ethical activities will not reap rewards, but below which firms that engage in unethical activities will be punished by actors in the economic marketplace. We will discuss an economic experiment to determine if such actors indeed form a moral floor. (shrink)

Corporate social responsibility (CSR) has become an increasingly significant managerial concept, yet the manager as an agent of corporate bureaucracy has been substantially missing from both the analytical and conceptual literature dealing with CSR. This article, which is both interpretative in nature and specific in reference to the U.K. cultural context, represents an attempt at addressing this lacuna by utilising qualitative data to explore the perceptions of managers working in corporations with developed CSR programmes. Exploring managerial perceptions of motives for (...) CSR initiatives, methods of stakeholder engagement, organisational integration of CSR and its impact on managerial work, this study concludes that an instrumental approach dominates, which indicates an external-internal organisational paradox in the design and execution of CSR initiatives. (shrink)

This article presents an alternative rationale for corporate philanthropy based on managerial values of benevolence and integrity. On the one hand, top managers with benevolence and integrity values are more likely to spread their intrinsic concern for others into the wider society in the form of corporate philanthropy. On the other hand, top managers high in benevolence and integrity are likely to contribute to improved managerial credibility and trusting firm-stakeholder relationships, thereby improving corporate financial performance. Therefore, the article makes the (...) argument that both corporate philanthropy and corporate financial performance can better be interpreted as resulting from managers’ benevolence and integrity values. (shrink)

This article proposes a unified theory of the relationship between corporate social performance (CSP) and corporate financial performance (CFP). The theory provides a framework for rationalizing the various and contradictory findings in past empirical research. The theory is based on the parallels between the business and CSR domains, and thus draws on models from economics.

This article explores the role of financial markets for sustainable development. More specifically, the authors ask to what extent financial markets foster and facilitate more sustainable business practices. The authors highlight that their current role is rather modest and conclude that, on the old paths, a paradoxical situation exists. On one hand, financial market participants increasingly integrate environmental, social, and governance criteria into their investment decisions, whereas on the other hand, in terms of organizational reality, there seems to be no (...) real shift toward more sustainable business practices. The authors identify two main challenges within the field of sustainable investments that are relevant for entering new avenues that may help overcome this situation. First, a reorientation toward a long-term paradigm for sustainable investments is important. Second, ESG data must become more trustworthy. From a theoretical point of view, the authors finally highlight the potential market consequences when ESG investment criteria are used. (shrink)

This study investigates the financial effects of additions to and deletions from the most well-known social stock index: the MSCI KLD 400. Our study makes use of the unique setting that index reconstitution provides and allows us to bypass possible issues of endogeneity that commonly plague empirical studies of the link between corporate social and financial performance. By examining not only short-term returns but also trading activity, earnings per share, and long-term performance of stocks that are involved in these events, (...) we bring forward evidence of a ‘social index effect’ where unethical transgressions are penalized more heavily than responsibility is rewarded. We find that the addition of a stock to the index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns. Trading volumes for deleted stocks are significantly increased on the event date, while the operational performances of the respective firms deteriorate after their deletion from the social index. (shrink)

Concentrated attention on institutional investors' activism has been perceived in the last few decades and further intensified in the post‐Enron era. A new area of particular significance that has emerged is institutional investors' growing awareness and practice of socially responsible investment (SRI). This article starts by reviewing the importance of institutional investor activism and the historical implication of SRI. Significantly, various elements that give rise to the growth of SRI in the modern business world are considered in detail. It is (...) recognized that, although current empirical evidence suggests ambiguous effects of SRI, the positive impact of institutional investors' activism on SRI is likely to have been undermined due to the underdevelopment of evaluation systems, and SRI should stand out as a good investment option for its joint financial and societal concerns. Nevertheless, obstructions still exist in the exercise of investor activism and the pursuit of SRI strategy, which implies that, at least in the near future, SRI strategy will remain as a minor investment trend for institutional investors in Anglo‐American countries. Additional regulatory methods and awarding schemes are, therefore, expected to motivate institutional investors' activism on SRI, and subsequently to promote global sustainability. (shrink)

Although critical differences exist between large companies and small‐ and medium‐sized enterprises (SMEs), limited empirical research has been done on human resource (HR)‐related corporate social responsibility (CSR). In this paper we study aging workforce management (AWM) as a component of CSR. Our study was conducted in the Netherlands through a randomly distributed online questionnaire. Managers and team leaders of 201 SMEs responded. The data were analyzed using multiple hierarchical regression analysis. Our results are twofold: first, findings suggest that CSR policies (...) in micro organizations with fewer than five employees seem to be strongly associated with AWM; and second, that companies with a focus on integration of older workers in daily activities do not perceive their actions as HR‐related. Using AWM as part of CSR helps to give insight into the role of the owner, company size and the nature of implicit CSR practices. Our study demonstrates that the use of AWM in CSR research can lead to valuable insights and therefore, our overarching research question is answered that AWM can be used when studying CSR. (shrink)

This study investigates whether financial performance is affected by corporate violations of laws and regulations. In a sample of 128 publicly traded banks that were subject to enforcement actions by US regulatory authorities over a 20-year period, we observed a significant negative market reaction pursuant to the violations. However, the market reaction did not vary meaningfully in accordance with the severity or repetitiveness of the violation. The results of this study are in conformity with previous research on industries other than (...) banking, notably with regard to negative market reaction. This confirms that shareholders in the banking industry react in a manner considerably similar to their counterparts in other industries. (shrink)

Integrating corporate social responsibility (CSR) initiatives in business is one of the great challenges facing firms today. Societal stakeholders require much more from the firm than pursuing profitability and growth. But these societal stakeholders often simply assume that increased societal expectations can easily be accommodated within efficiently run business operations, without much attention devoted to process issues. We build upon the core—periphery thesis to explore potential avenues for firms to add recurring CSR initiatives to their existing business practices. Based on (...) Siggelkow's (Admin Sei Quart 47: 125-159, 2002) analysis of organizational change, we conceptualize seven major patterns of CSR initiative adoption. We develop a new organizing framework showing how a firm can integrate CSR initiatives in business. Within the new framework, each of the seven patterns represents an idiosyncratic path through which recurring CSR initiatives can be included as practices into conventional operations. We also explore the nature of the resulting internal fit between recurring CSR initiatives and business practices. (shrink)

The global refugee crisis has posed severe challenges to social stability and sustainable development around the world. While the business sector is expected to shoulder social responsibility in crisis relief efforts, our initial assessment shows that refugee‐related corporate social responsibility (CSR) significantly diverged across the Global Fortune 500 corporations. To advance scholars and managers' understanding of this complex CSR issue, this study draws upon National Business System Theory to explore how country‐level factors influence the multinational corporations' CSR communication about the (...) refugee issue. Specifically, the study focuses on the strategic cross‐sector alliances between corporations, NGOs, and IGOs. The analysis shows that in this controversial global crisis, the following factors of corporations' countries‐of‐origin can significantly affect the level of cross‐sector CSR alliances: democracy levels, economic inequality levels, and unemployment rates. Findings of this study provide practical guidelines that can help managers to anticipate societal expectations when dealing with controversial social issues in an international setting. Our findings could also assist policymakers, NGOs, and IGOs to better design strategies to mobilize the corporate resources. (shrink)

The purpose of this study is to identify China’s indigenous conceptual dimensions of corporate social responsibility (CSR) and to increase the knowledge and comprehension about CSR in specific context. We conducted an inductive analysis of CSR in China based on an open-ended survey of 630 CEOs and business owners in 12 provinces (municipalities) in China. In the survey, we collected CSR sample responses. After examining the qualitative data, we identified nine dimensions of CSR, among which six dimensions are similar to (...) their western counterparts; however, the other three dimensions were never mentioned in previous literature, which mostly study the cases in the western world. In addition, two of the widely accepted CSR dimensions in the western world have no embodiments in China. A comparative study of CSR between China and western countries also unveiled some unique dimensions of CSR in China. In conclusion, CSR manifested in China is different from that in western countries, and China’s CSR is closely related to its social and cultural background. (shrink)

To date, B&S researchers have pursued their normative aims through strategic and moral arguments that are limited because they adopt a rational actor behavioral model and firm-level focus. I argue that it would be beneficial for B&S scholars to pursue alternate approaches based on critical realism (CR) and neoinstitutional theory (IT). Such a shift would have a number of benefits. For one, CR and IT recognize the complex roots of firm behavior and provide tools for its investigation. Both approaches also (...) note the importance of social context and IT, in particular, points to tangible sites where changes in (and outcomes of) corporate practices can be assessed. CR also has an emancipatory ethos which harkens a role for scholars in social change, while IT provides mechanisms to ground this ethos in tangible activities that go beyond appealing to managers’ strategic or moral sensibilities. (shrink)

The corporate financial performance (CFP)–corporate social performance (CSP) relationship has been investigated many times over the past few decades, yet the notion of CSP has generally been understood to be a single, monolithic aspect of corporate strategy. This article examines the common CFP–CSP understanding in three distinct ways: (1) by extending the evaluation of CSP as a complex, multistakeholder notion; (2) by analyzing CSP's relationship with the firm's financial performance at a given point in time as a lead (independent) variable (...) in the relationship and as a lag (dependent) variable in the relationship; and (3) for both positive and negative stakeholder relationships. The results indicate that the employee emerges as the stakeholder group most strongly linked to CFP, followed by the consumer stakeholder. The natural environment and the community stakeholder group are minimally associated with CFP. General support is found for a CFP–CSP relationship at a given point in time, with some support found for CSP as a lead (independent) variable. When used as a measure of financial performance, return on assets is more often correlated with CSP than is return on equity. These results and their implications are discussed. (shrink)