This paper traces the development of corporate citizenship as a way of framing business and society relations, and critically examines the content of contemporary understandings of the term. These conventional views of corporate citizenship are argued to contribute little or nothing to existing notions of corporate social responsibility and corporate philanthropy. The paper then proposes a new direction, which particularly exposes the element of "citizenship". Being a political concept, citizenship can only be reasonably understood from that theoretical angle. This suggests (...) that citizenship consists of a bundle of rights conventionally granted and protected by governments of states. However, the more that governmental power and sovereignty have come under threat, the more that relevant political functions have gradually shifted towards the corporate sphere – and it is at this point where "corporate" involvement into "citizenship" becomes an issue. Consequently, "corporate citizens" are substantially more than fellow members of the same community who cosily rub shoulders with other fellow citizens while bravely respecting those other citizens'' rights and living up to their own responsibility as corporations – as the conventional rhetoric wants us to believe. Behind this relatively innocuous mask then, the true face of corporate citizenship suggests that the corporate role in contemporary citizenship is far more profound, and ultimately in need of urgent reappraisal. (shrink)

Behaving ethically depends on the ability to recognize that ethical issues exist, to see from an ethical point of view. This ability to see and respond ethically may be related more to attributes of corporate culture than to attributes of individual employees. Efforts to increase ethical standards and decrease pressure to behave unethically should therefore concentrate on the organization and its culture. The purpose of this paper is to discuss how total quality (TQ) techniques can facilitate the development of a (...) cooperative corporate culture that promotes and encourages ethical behavior throughout an organization. (shrink)

Prior literature on socially responsible investment has contended that excluding “sin stocks” from a portfolio will reduce performance and increase risk. Further, incorporating stocks of firms with positive social responsibility scores will improve performance and reduce risk. We simulate portfolios designed to mimic typical equity mutual funds’ holdings and investigate these propositions. We remove the potentially confounding influences of differences in manager skill, transaction costs and fees, and conduct a clean experiment on the effect of positive and negative portfolio screening. (...) We find no difference in the return or risk of screened and unscreened portfolios. We conclude that a typical socially responsible fund will neither gain nor lose from screening its portfolio. (shrink)

This article analyzes the issue of organizational transparency through the lens of Thomas Aquinas’ ethics. It provides moral justification for current claims about corporate transparency and sheds light on the ethical values and virtues affecting information disclosure decisions. Transparency is conceptualized as an informational mechanism necessary for performing the virtues of truthfulness, justice, and prudence. This article extends the organizational transparency and corporate social responsibility literatures by providing an alternative moral justification grounded in virtue-based theory, which extends our understanding of (...) the information disclosure decisions made by management. (shrink)

This paper examines whether a firm’s financial performance is associated with superior environmental, social and governance scores in emerging markets of multinationals in Latin America. The study addresses the current research gap on this issue; it develops hypotheses and tests them by applying linear regressions with a data panel drawn from the Thomson Reuters Eikon™ database to analyse data on 104 multinationals from Brazil, Chile, Colombia, Mexico and Peru between 2011 and 2015. The results suggest that the relationship between the (...) ESG score and FP is significantly statistically negative. Furthermore, in examining environmental, social and governance separately to accurately determine each variable’s relationship to multilatinas’ FP, the results reveal a negative relationship. Finally, the empirical analysis provides evidence for a moderating effect of financial slack and geographic international diversification on the relationship between ESG dimensions and firms’ FP. This study furthers understanding of the relationship between ESG dimensions and FP for the Latin American business context. (shrink)

There has been some theoretical and empirical debate that the positive relationship between corporate social performance (CSP) and firm financial performance (FFP) is spurious and in fact caused by a third factor, namely large firm size. This study examines this question by integrating three meta-analyses of more than two decades of research on (1) CSP and FFP, (2) firm size and CSP, and (3) firm size and FFP into one path-analytic model. The present study does not confirm size as a (...) third factor which would confound the relationship between CSP and FFP. That is, even if firm size is controlled for across studies (comprising, on average, over 15 000 observations), CSP and FFP remain positively correlated, showing a "true-score" corrected path coefficient p of 0.37. (shrink)

This article uses a sample of 3076 employees working in the USA to examine the relationship between the frequency of unethical behavior that employees observe in their organization and their intention to whistleblow. The results confirm the expected curvilinear relationship based on the Focus Theory of Normative Conduct. This relationship is a combination of a diminishing negative relationship between the frequency of observed unethical behavior and the intention to whistleblow internally and a linear positive relationship between the frequency of observed (...) unethical behavior and the intention to whistleblow externally. The beliefs of employees about how supportive their management is when handling whistleblowing reports moderates the relationship between the frequency of unethical behavior employees observe and their intention to whistleblow. (shrink)

This article seeks to contribute to a vision for leadership in business based on a recovery of virtue. The vision for leadership articulated here draws principally on the writings of the classical philosopher Aristotle and of the contemporary philosopher Josef Pieper. Without discounting the ever-increasing complexity of modern business, this essay will attempt to reconstruct Aristotle’s emphasis on virtue and moral character, and argues for the philosopher’s relevance to modern management and corporate leadership. The paper concludes that the message of (...) virtue is a message of hope and attempts to find plain language to articulate its value to those engaged in business or concerned with the formulation of government policy. (shrink)

This paper investigates the impact of negative screening on the investment universe as well as on financial performance. We come up with a novel identification process and as such depart from mainstream socially responsible investing literature by concentrating on individual firms’ conduct and by studying a much wider range of issues. Firstly, we study the size and financial performance of fourteen potentially controversial issues: abortion, adult entertainment, alcohol, animal testing, contraceptives, controversial weapons, fur, gambling, genetic engineering, meat, nuclear power, pork, (...) stem cells, and tobacco. We investigate an international sample of more than 1,600 stocks for more than twenty years. We then analyze the impact of applying negative screens to a market portfolio. Our findings suggest that the choice for negative screening strategies does matter for the size of the investment universe as well as for risk-adjusted return performance. Investing in controversial stocks in many cases results in additional risk-adjusted returns, whereas excluding them may reduce financial performance. These findings suggest that there are opportunity costs to negative screening. (shrink)

The concept of sustainable and responsible (SR) investments expresses that every investment should be based on the SR investor’s code of ethics. To a large extent the allocation of SR investments to more sustainable companies and ethical practices is based on the environmental, social, and corporate governance (ESG) scores provided by rating agencies. However, a thorough investigation of ESG scores is a neglected topic in the literature. This paper uses Thomson Reuters ASSET4 ESG ratings to analyze the influence of firm (...) size, a company’s available resources for providing ESG data, and the availability of a company’s ESG data on the company’s sustainability performance. We find a significant positive correlation between the stated variables, which can be explained by organizational legitimacy. The results raise the question of whether the way the ESG score measures corporate sustainability gives an advantage to larger firms with more resources while not providing SR investors with the information needed to make decisions based on their beliefs. Due to our results, SR investors and scholars should reopen the discussion about: what sustainability rating agencies measure with ESG scores, what exactly needs to be measured, and if the sustainable finance community can reach their self-imposed objectives with this measurement. (shrink)

Many countries have regulations that require firms to engage in minimum levels of corporate social activities in areas such as the environment and social welfare. In this paper, we argue that changes in a firm’s compliance with CS regulations are reflected in its reputation for corporate social responsibility, which affects the firm’s performance. The performance impacts depend on whether the firm’s CSR reputation in the current and prior periods is positive, neutral, or negative. Our theoretical framework draws on the reputation (...) literature and on the concepts of recency bias, which weights the present more heavily than the past, and negativity bias, which weights negative assessments more heavily than neutral or positive assessments. We test our hypotheses on a sample of 7317 banks over 1992–2007 where we compare a bank’s return on assets with its current and prior compliance ratings under the U.S. Community Reinvestment Act. We find that changes in CSR reputation have predictable, asymmetric, and sizeable impacts on firm performance. For example, for an average bank with $1 billion in assets, gaining a positive CSR reputation translates into a rise in profits of 4.04%; gaining a negative CSR reputation results in a drop in profits of − 7.8%. (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)

As part of the Securities and Exchange Commission’s revision of Regulation S–K, which lays out reporting requirements for publicly-listed companies, many investors proposed the mandatory disclosure of sustainability information in the form of environmental, social and governance data. However, progress is contingent on collecting evidence regarding which sustainability disclosures are financially material. To inform this issue, we examine materiality standards developed by the Sustainability Accounting Standards Board. Firms voluntarily disclosing more SASB-identified sustainability information exhibit greater price informativeness, while the disclosure (...) of non-SASB information does not relate to informativeness. The results are robust to a changes analysis and a difference-in-differences analysis that exploits the staggered release of SASB standards across different industries over time. We also document stronger results for firms with higher exposure to sustainability issues, poorer sustainability ratings, greater institutional and socially responsible investment fund ownership, and coverage from analysts with lower portfolio complexity. (shrink)

This paper examines the relationship between corporate social responsibility and financial performance for Islamic banks in the Gulf Cooperation Council region over the period 2000–2014 by generating CSR-related data through disclosure analysis of the annual reports of the sampled banks. The findings of this study indicate that there is a significant positive relationship between CSR disclosure and the financial performance of Islamic banks in the GCC countries. The results also show a positive relationship between CSR disclosure and the future financial (...) performance of GCC Islamic banks, potentially indicating that current CSR activities carried out by Islamic banks in the GCC could have a long-term impact on their financial performance. Furthermore, despite demonstrating a significant positive relationship between the composite measure of the CSR disclosure index and financial performance, the findings show no statistically significant relationship between the individual dimensions of the CSR disclosure index and the current financial performance measure except for ‘mission and vision’ and ‘products and services’. Similarly, the empirical results detect a positive significant association only between ‘mission and vision’ dimension and future financial performance of the examined banks. (shrink)

Building on earlier work on the relationship between corporate social performance (CSP) and a firm’s financial performance, this integrative empirical study supports the theoretical argument that the higher a firm’s CSP the lower its financial risk. Specifically, the relationship between CSP and risk appears to be one of reciprocal causality, because prior CSP is negatively related to subsequent financial risk, and prior financial risk is negatively related to subsequent CSP. Additionally, CSP is more strongly correlated with measures of market risk (...) than measures of accounting risk. Of all CSP measures, reputation for social responsibility appears to be the most important one in terms of its risk implications. (shrink)

Based on the extended conceptualization of corporate citizenship, as provided by Matten and Crane :166–179, 2005), this paper examines the new role of corporations in society. Taking the ideas of Matten and Crane one step further, we argue that the status of corporations as citizens is not solely defined by their factual engagement in the provision of citizenship rights to others. By analysing political and sociological citizenship theories, we show that such engagement is more adequately explained by a change in (...) the self-conception of corporate citizens from corporate bourgeois to corporate citoyens. While the corporate bourgeois acts primarily for private business purposes, the corporate citoyen engages in society, performing civil and political rights and duties. As an intermediate actor in society, shaped by the principle of subsidiary task-sharing, the corporate citoyen undertakes co-responsibility for social and civic affairs and actively collaborates with fellow citizens below, beside and beyond governmental regulation. (shrink)

While top-down descriptors have received much attention in explaining corruption, we develop a grassroots model to describe structural factors that may influence the emergence and spread of an individual’s (un)ethical behavior within organizations. We begin with a discussion of the economics justification of the benefits of competition, a rationale used by firms to adopt structural aides such as the ‹stacking’ practice that was implemented at Enron. We discuss and develop an individual-level theory of planned behavior, then extend it to the (...) dyadic level in an internally competitive organization, and finally extend the dyadic model to the social network. We apply social network theory to predict favorable and unfavorable conditions for the emergence and diffusion of an intraorganizational instance of unethical behavior and find that network conditions favoring the suppression of the emergence of unethical behavior also promote its diffusion. For illustrative purposes, we utilize examples from Enron’s internally competitive structure to embed our arguments in a real world context and bring reality to our theorizing. Implications for both researchers and managers are discussed. (shrink)

The purpose of this paper is to investigate the nature of rhetoric and rhetorical strategies that are implicit in the standalone sustainability reporting of the top 24 companies of the Fortune 500 Global. We adopt Bormann’s :396–407, 1972) SCT framework to study the rhetorical situation and how corporate sustainability reporting messages can be communicated to the audience. The SCT concepts in the sustainability reporting’s communication are subject to different types of legitimacy strategies that are used by corporations as a validity (...) and legitimacy claim in the reports. A content analysis has been conducted and structural coding schemes have been developed based on the literature. The schemes are applied to the SCT model which recognizes the symbolic convergent processes of fantasy among communicators in a Society. The study reveals that most of the sample companies communicate fantasy type and rhetorical vision in their corporate sustainability reporting. However, the disclosure or messages are different across locations and other taxonomies of the SCT framework. This study contributes to the current CSR literature about how symbolic or fantasy understandings can be interpreted by the users. It also discusses the persuasion styles that are adopted by the companies for communication purposes. This study is the theoretical extension of the SCT. Researchers may be interested in further investigating other online communication paths, such as human rights reports and director’s reports. (shrink)

In this article, we shall attempt to lay down the parameters within which the practice of the virtues may be enabled in the field of finance. We shall be drawing from the three main sources, Aristotle, Catholic Social Teaching and MacIntyre, on which virtue ethics is based. The research question is what ought to be done for financial activities to truly contribute to eudaimonia or human flourishing, to the achievement of three distinct kinds of goods as required of virtue, “those (...) internal to practices, those which are the goods of an individual life and those which are the goods of the community”, and to “[help] man on the path of salvation” in the midst of complex network of relationships in modern societies. These parameters could then be taken as conditions financiers ought to fulfill in order to live the virtues in their work and across different life spheres. (shrink)

We conduct the first comparative analysis of the financial performance of European green, black and conventional mutual funds. Based on a unique dataset of 175 green, 259 black and 976 conventional mutual funds, the investigation contrasts the financial performance of the three dissimilar investment orientations over the 1991–2014 period. Over the full sample period, green mutual funds significantly underperform relative to conventional funds, while no significant risk-adjusted performance differences between green and black mutual funds could be established during the same (...) period. Environmentally friendly investment vehicles display a significant exposure to small cap and growth stocks, while black funds are more exposed to value stocks. Remarkably, the green funds’ risk-adjusted return profile progressively improves over time until no difference in the performance of the green and the conventional classes could be discerned. Further evidence suggests that the green funds are beginning to significantly outperform their black peers, especially over the 2012–2014 investment window. (shrink)

This article analyzes the issue of organizational transparency through the lens of Thomas Aquinas’ ethics. It provides moral justification for current claims about corporate transparency and sheds light on the ethical values and virtues affecting information disclosure decisions. Transparency is conceptualized as an informational mechanism necessary for performing the virtues of truthfulness, justice, and prudence. This article extends the organizational transparency and corporate social responsibility literatures by providing an alternative moral justification grounded in virtue-based theory, which extends our understanding of (...) the information disclosure decisions made by management. (shrink)

Management of organizational tensions can facilitate the simultaneous advancement of economic, social, and environmental priorities. The approach is based on managers identifying and managing tensions between the three priorities, by employing one of the three strategic responses. Although recent work has provided a theoretical basis for such tension acknowledgment and management, there is a dearth of empirical studies. We interviewed 32 corporate sustainability managers across 25 forestry and wood-products organizations in Australia. Study participants were divided into two groups: those considered (...) effective at corporate sustainability and a status-quo group. Contrary to current theory, our findings showed that acknowledgment of organizational tensions was widespread in the Australian forestry and wood-products industry and not limited to those managers who are effective at managing corporate sustainability. What differed was the degree to which managers did something about the perceived tensions—with the effective group more consistently acting to manage and resolve paradoxical scenarios. Our findings suggest that existing theoretical constructs of tension management may not adequately capture the individual-level complexity involved with managing tensions in practice. (shrink)

This study empirically analyses the exclusion of companies from investors’ investment universe due to a company’s business model or due to a company’s violations of international norms. We conduct a time-series analysis of the performance implications of the exclusion decisions of two leading Nordic investors, Norway’s Government Pension Fund-Global and Sweden’s AP-funds. We find that their portfolios of excluded companies do not generate an abnormal return relative to the funds’ benchmark index. While the exclusion portfolios show higher risk than the (...) respective benchmark, this difference is only statistically significant for the case of GPFG. These findings suggest that the exclusion of the companies generally does not harm funds’ performance. We interpret these findings as indicative that with exclusionary screening, as practiced by the sample funds, asset owners can meet the ethical objectives of their beneficiaries without compromising financial returns. (shrink)

This paper examines the impact of the recent financial crisis on the relation between a firm’s risk and social performance using a sample of non-financial U.S. firms covering the period 1991–2012. We find that the relation between SP and risk is significantly different in the crisis period compared to the pre-crisis period. SP reduces volatility during the financial crisis. The risk reduction potential of SP is mainly due to the strengths component of SP. Since the relation of risk is stronger (...) with SP strengths than SP concerns, this implies an asymmetric relation between these SP components and a firm’s risk. Specifically, strengths act as a risk reduction tool during an adverse economic environment. (shrink)