How do individuals respond when they perceive that their family business has been built upon unethical business conduct? Drawing on an expanded version of Hirschman’s typology of generic responses to declining situations (Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States, Harvard University Press, Cambridge, MA, 1970), which includes responses of Exit, Voice, Loyalty, and Neglect, we offer a model that predicts probability of intended response behavior as a function of normative obligation (i.e., what one perceives ought (...) to be done), managerial discretion (i.e., what one perceives can be done), and successor commitment to the firm. The model is tested on 124 business school students exposed to a scenario depicting an inherited ethical dilemma occurring in a family business from Arthur Miller’s play All My Sons, and shows support for elements of the proposed framework. Most notable is a significant negative relationship between normative firm-directed commitment and the response of Neglect. (shrink)

This theoretical paper is offered in the spirit of advancing the debate on the socioemotional wealth construct and its impact on how family firms conceptualize and practise corporate social responsibility. The study builds on Kellermanns et al.’s :1175–1182, 2012) claim that the SEW dimensions can be positively and negatively valenced as well as makes a distinction between the selective and instrumental approach to CSR and the holistic and normative one. Drawing on these considerations, it provides a theoretical underpinning in favour (...) of the view that SEW has ambivalent nature and therefore can produce detrimental outcomes for stakeholders of family companies. In this way, the study challenges the implicit assumption prevalent in the literature that SEW is “a prosocial and positive stimulus”. Crucially, it expands on the SEW construct by arguing that, given its ambivalent nature, SEW, as such, is at odds with the “strategic, whole-business view of responsibility”. Consequently, it posits that family firms—because of their concern with SEW—may be more likely to adopt the instrumental and selective rather than strategic and normative approach. Hence, it also makes the case for regarding the latter as a reference point to investigate the family company’s attitude towards social responsibility. It concludes by summarising the argument and offering future research avenues. (shrink)

Using a signaling framework, we argue that ethical behavior as evidenced by charitable donations is viewed more positively by investors when seen not to be based on self-serving motives but rather on authentic generosity that builds moral capital. The affirmed religiosity of CEOs may make their ethical position more credible, while their embeddedness within a family business suggests that CEOs are backed by powerful owners with long-time horizons and a desire to build moral capital with stakeholders. We find in a (...) study of market responses to 1572 corporate donations by S&P 1500 firms that financial markets react more positively to charitable initiatives from firms with religion-declared CEOs, but only if these are family businesses. (shrink)

While studies have investigated the moral issue associated with downsizing, little research attention has been directed to leaders’ behaviors that result in organizational decline and eventually lead them to make a downsizing decision. This study tests a sequence-based model to assess (1) the impact of leaders’ risk-aversion and self-centeredness on organizational decline and downsizing and (2) the impact of organizational and industry decline on organizational downsizing. We address a gap in the decline literature that has only implicitly alluded to leadership (...) characteristics as forerunners of decline. Data collected from 85 firms indicate that both leadership risk-aversion and self-centeredness are significantly related to organizational decline. This results in intensified organizational downsizing. However, industry decline affects downsizing more significantly. (shrink)

A unique dataset is exploited to provide insight into the impact of management quality practices on corporate social responsibility for a sample of US manufacturing firms. Our results suggest that MQPs are positively and significantly related to a firm’s CSR rating. This confirms that intangible assets affect corporate outcomes. We also show that superior MQPs matter more in explaining the CSR dimensions that are related directly to the firm’s primary stakeholders.

Family firms are ubiquitous and play a crucial role across all world economies, but how they differ in the disclosure of social and environmental actions from non-family firms has been largely overlooked in the literature. Advancing the discourse on corporate social responsibility reporting, we examine how family influence on a business organization affects CSR reporting. The arguments developed here draw on institutional theory, using a rich body of empirical evidence gathered through a content analysis of the CSR reports of 98 (...) large- and medium-sized Italian firms. The grounded theory analysis informs and contextualizes several differences in the type and content of corporate social responsibility reports of family and non-family firms. Our findings show that in comparison to non-family firms, family firms disseminate a greater variety of CSR reports, are less compliant with CSR standards and place emphasis on different CSR topics. We, thus, contribute to the family business and corporate social responsibility reporting literatures in several ways, offering implications for practice and outlining promising avenues for future research. (shrink)

This study comparatively examines the dividends behavior in state-controlled firms versus family-controlled firms. With the sample of large industrial firms listed on the Main Board of Hong Kong Stock Exchange, we investigate the dividends payment rates, stability of dividends payment, the effects of firm size, profitability and growth opportunity on likelihood to pay dividends, as well as the concentration of dividend in state-controlled versus family-controlled firms. Based on the findings, we derive some ethical implications of dividends policy regarding the differences (...) in business ethical behavior, corporate social responsibility, corporate governance, business sustainability, and shareholder activism in state-controlled versus family-controlled firms, as well as the improvement in these respects through cross-listing in Hong Kong. (shrink)

This study questions the assumption that firms always prioritize economic stakeholders over social stakeholders. An examination of 468 Chinese private firms reveals three important conditions driving firms to prioritize social stakeholders over economic stakeholders. First, the percentage of family ownership increases the likelihood of social stakeholder priority up to a point, after which further increase in the percentage of family ownership decreases the likelihood of social stakeholder priority. Firms planning initial public offerings and smaller firms are more likely to prioritize (...) social stakeholders. The findings reveal important exceptions and nuances in stakeholder management strategies. (shrink)

Based on the concept of shareholder primacy, many scholars have argued that it is more important for businesses to earn profits for their shareholders than to provide benefits to society at large. Corporate social responsibility is often regarded as an investment that comes at the expense of shareholders. In contrast, research analyzing the connections between the equity ownership structure of a company and its level of CSR engagement suggests that CSR offers benefits to shareholders that go beyond direct financial returns (...) from investments. This study provides a comprehensive review and systematic assessment of theoretical considerations and approaches regarding different forms of equity ownership and their relationships to CSR, and it discusses the relevant benefits and motivations of shareholders. The perceived value of these CSR benefits varies among different types of shareholders, as they assign unequal values to short-term financial or to rather long-term CSR benefits. Based on a literature sample of 146 publications, this review demonstrates central problems inherent in previous analyses. Given the ambiguous and partially contradictory findings of prior research, this study identifies potential moderating influences that help clarify empirical evidence. A contingency approach is suggested in future research, as this can help resolve the problem of contradictory empirical findings and theoretical arguments. (shrink)

This study explores the downsizing propensity of family and non-family firms by considering their territorial embeddedness during both periods of economic stability and financial crisis. By drawing on a panel dataset of Spanish manufacturing firms for the period 2002–2015, we show that, all things being equal, family firms have a lower propensity to downsizing than non-family firms. When considering the effect of territorial embeddedness, we found that territorially embedded family firms have an even lower propensity to downsizing than their non-family (...) counterparts. Furthermore, the concern of territorially embedded family firms for their employees’ welfare was particularly pronounced during the years of the global financial crisis. This result is explained by the existence of socially proximate relationships with the firms’ immediate surroundings, based on similarity and a sense of belonging, which push deeply rooted family firms to treat their employees as salient stakeholders during hard times. Overall, our study stresses the importance of local roots in moderating the relationship between family firms and downsizing. (shrink)

Extending the dialogue on corporate social performance as descriptive stakeholder management, we examine differences in CSP activity between family and nonfamily firms. We argue that CSP activity can be explained by the firm’s identity orientation toward stakeholders. Specifically, individualistic, relational, or collectivistic identity orientations can describe a firm’s level of CSP activity toward certain stakeholders. Family firms, we suggest, adopt a more relational orientation toward their stakeholders than nonfamily firms, and thus engage in higher levels of CSP. Further, we invoke (...) collectivistic identity orientation to argue that the higher the level of family or founder involvement within a family firm, the greater the level of CSP toward specific stakeholders. Using social performance rating data from 1991 to 2005, we find that family and nonfamily firms demonstrate notable differences in terms of social initiatives and social concerns. We also find that the level of family and founder involvement is related to the type and frequency of a family firm’s social initiatives and social concerns. (shrink)

This article reviews empirical research of corporate social performance using Kinder, Lydenberg, Domini social ratings data through 2011. The review synthesizes 100 empirical studies, noting consistencies and inconsistencies among studies examining similar constructs. Notable consistencies were that, although accounting measures of financial performance were a positive outcome of CSP, the same was not often true of stock returns. Also, demographics of top management teams increased CSP strengths, but did not reduce concerns, whereas organizational decentralization reduced CSP concerns. Notable inconsistencies were (...) that CEO demographics were not as often related to CSP as were TMT demographics, indicating that managerial discretion may be an important mitigating factor shaping managerial effects on CSP. Also, although CSP for some organizations seemed influenced by institutional pressures, other organizations appeared to be less influenced, perhaps suggesting that some organizations are more able than others to resist institutional pressures. Future research should attempt to probe observed consistencies and inconsistencies, and to test the boundaries of observed relationships, toward a disciplined program of middle-range theory development. (shrink)

Business Ethics: A European Review, EarlyView.

Research studying the effects of non-financial goals on stakeholder relationships remains inconclusive, with scholars disagreeing on which goals increase or decrease a firm’s proactive stakeholder engagement (PSE). Instead of examining which goals act as forces for good or evil, we shift the focus of recent discussions by emphasizing the mechanisms that can explain the positive and negative stakeholder outcomes of non-financial goals under the umbrella of one theoretical lens. We do so by introducing an ethics of care perspective. Specifically, we (...) first show that four of the five most distinctive non-financial goals of family owners jointly stipulate care-based morality, which likely enhances PSE. However, we subsequently argue that one goal, namely, the wish to exert power and influence, interacts with other goals and related care-based morality to lower PSE. Finally, we show how female family directors temper these interactions. Our insights into the additive and interactive effects of non-financial goals on PSE contribute to corporate social responsibility research, to the organizational goal literature, to family business studies and to work drawing on care ethics in management studies. (shrink)

There is a dearth of business ethics research on family firms, despite the importance of such firms to the US economy. We answer Vazquez’s call to examine the intersection of family-firm research and business ethics, by investigating whether external auditors assess higher risk of fraud in family firms. We test the contradictory predictions of two dominant theoretical perspectives in family-firm research—entrenchment theory and alignment theory. We conduct an experiment with highly experienced external audit professionals, who assess the risk of fraud (...) and make client acceptance decisions for family firms versus non-family firms with different strength of corporate governance: strong versus weak audit committees. We find that auditors assess the risk of fraud as higher for family firms than for non-family firms, consistent with the predictions of entrenchment theory. Auditors are also less likely to make client acceptance recommendations for family firms. The strength of the AC moderates the family-firm effect, whereby auditors assess family firms with weak ACs to have the highest fraud risk and to be the least desirable audit clients. Our findings suggest that auditors perceive more severe agency conflicts to be present in family firms than in non-family firms, consistent with entrenchment theory, according to which family members may behave opportunistically to extract rents and potentially expropriate the firm’s resources at the expense of minority shareholders. (shrink)

This paper investigates the influence of family control on the quality of labor relations. Using French workplace-level data, we find that family firms experience less frequent and less intense labor conflicts. Moreover, family involvement tends to offset the negative effect of labor disputes on corporate performance. We examine whether specific family patterns are conducive to better labor relations. We distinguish active from passive family control, eponymous from non-eponymous family businesses, and break down family firms into founder-controlled and descendant-controlled companies. It (...) appears that the benefits of family control are not attributable to a given type of family firm. These findings suggest that peaceful labor relationships are a peculiar attribute that families generally bring to corporations and extend our understanding of the “family effect” on organizational performance. (shrink)