A Broader Look at Firms’ Corporate Social Performance in 2000-2010

 

10310820984_fb57a27068_z[We’re pleased to welcome Elise Perrault of College of Charleston. Elise recently published an article in Business & Society, entitled “What have firms been doing? Exploring what KLD data report about firms’ corporate social performance (CSP) in the period 2000-2010,” with co-author Michael Quinn of Bentley University.]

With a strong interest for firms’ relationship with stakeholders and, more broadly, society, we constantly read about how firms address – or not – a wide variety of social issues. However, this stream of research generally provides anecdotal evidence or analyzes antecedents and consequences of firms’ involvement in a targeted issue (such as philanthrophy or environmental management, for example). In short, we felt the need for a broad, 30,000 ft, view of how firms generally engage with stakeholders through addressing social issues. At the same time, with the soaring popularity of KLD data in the field, we wanted to gain a more precise appreciation of how this data source pictured firms’ actions in society.

We find our results quite revealing and at times surprising. For instance, the results show that firms are increasingly attending to secondary stakeholders, even while garnering more concerns on primary stakeholder dimensions. This points us to question whether managers are experiencing shifting beliefs regarding the value of BAS CoverCSR; specifically that it represents less a mechanism to attract stakeholder support and more a cornerstone to their risk management approach in terms of how society values the firm’s existence. We also find, as expected, that firms generally nurture strengths in the same dimensions in which they present concerns.

The most surprising finding is the extent to which prior corporate social performance (CSP) in a given dimension is linked to CSP in other dimensions over time. This suggests that as firms engage in CSP, they find rewards that drives them to further invest in yet other dimensions of CSP. As a result, we are led to reconsider the notion of a “virtuous circle” (Waddock & Graves, 1997) and suggest that future research examines in greater depth the real benefits that firms perceive from CSP and the motives that drive their increasing commitment to CSP.

Having provided this broader view of firms’ involvement with stakeholders and social issues, we hope this research will serve as a foundation for future research in several ways. For starters, we note the significance of industry dummies in the analysis. This finding confirms what previous research indicates, that industry matters to CSP strenghts and concerns. However, the extent to which industry affiliation predisposes a population of firms to certain CSP strenghts or concerns remains unaddressed. Pushing further in this direction would be to explore how industry affiliation affects stakeholders’ perceptions, and whether stakeholders are more forgiving or scrutinizing of firms in certain industries, for example.

Another insight from our analyses is the importance of using a long time frame when analyzing firms’ CSP, which has seldom been used in previous research. Doing so would enable researchers to see patterns and connections between various dimensions of CSP, answering questions such as “Do strengths (concerns) on certain dimensions of CSP generally prompt firms to subsequently perform better or worse on these and other dimensions?” While this would shed light on the ways in which firms can be primed to address certin social issues, on a broader scale, these analyses contribute to the conversation debating the fundamental question regarding the purpose of the firm and its obligations to shareholders and stakeholders.

The abstract for the paper:

With the blossoming of research on corporate social performance (CSP), the data produced by Kinder, Lydenberg, Domini (KLD) have become the standard to measure firms’ social and stakeholder actions. However, to date, only a few studies have focused on examining the data directly, and have done so largely in terms of validating the concepts and methods in the data set’s construction. The present study seeks to complement these efforts by contributing knowledge about what the KLD data report on firms’ actions toward primary and secondary stakeholders, and the dimensions of CSP that firms generally engage in, together or sequentially. With data on 3,073 firms over the period 2000-2010, results show that firms expend more resources on garnering strengths in primary stakeholder dimensions, although this trend is sharply deteriorating to the benefit of secondary stakeholders—notably the natural environment. Results also show that firms generally approach CSP with a mixed behavior, with strengths and concerns in the same dimensions, especially as it pertains to secondary stakeholders. These are the same dimensions in which firms show the longer, more intrinsic commitments, suggesting that secondary stakeholder strengths and concerns may be structural in nature. However, there is also evidence of relationships across dimensions, indicating that firms’ involvement in CSP can generate momentum. The rich implications of these findings are discussed.

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Rethinking How We Measure Corporate Social Responsibility

10617765806_b7f4f4ca12_z[We’re pleased to welcome Gunther Capelle-Blancard. Gunther recently published an article in Business & Society with co-author Aurélien Petit entitled “The Weighting of CSR Dimensions: One Size Does Not Fit All.”]

Companies could develop eco-friendly products or support social programs, and meanwhile damage the environment or experiment governance failures. Corporate Social Responsibility is multidimensional. Often, though, responsible investors (and customers) are interested in synthetic rankings that sum up the ESG (Environmental, Social and corporate Governance) scores.  Such composite scores raise fundamental questions which, surprisingly, are widely overlooked by academics and practitioners.

If the question of fungibility (“do good actions compensate bad ones?”) is essential and has been discussed in the literature, this article focuses on commensurability (the “apples and oranges” problem). For instance, Oil & Gas companies are mostly criticized on environmental issues, while corporate governance is the main stake for Banks. Overall ratings that sum equally environmental, social and corporate governance marks would not reflect the sectors’ concerns. One size does not fit all.

We develop a new method of CSR rating, based on news disclosed by the media and nongovernmental organizations. Thanks to the Covalence EthicalQuote database, we BAS Coveranalyze more than 70,000 positive or negative ESG news, regarding the world’s largest companies. Our results suggest that rating agencies and previous academic research underweight the environment and corporate governance. Mostly, our method allows fitting the ratings to the sectors’ specific stakes. It can be used to assess Corporate Social Performance better.

The abstract for the paper:

Although the concept of corporate social responsibility (CSR) is fundamentally multidimensional, most studies use composite scores to assess corporate social performance (CSP). How relevant are such composite scores? How the CSR dimensions are weighted? Should the weighting scheme be the same across sectors? This article proposes an original weighting scheme of CSR strengths and concerns, at the sector level, which is proportional to media and nongovernmental organizations (NGOs) scrutiny. The authors show that previous CSP assessments underweight environmental and corporate governance concerns. Moreover, findings suggest that firms that are exposed to the closest scrutiny are usually criticized on one single dimension: for instance, banks for bad corporate governance, and basic-resource firms for environmental damage. Composite scores based on equal weights hence misrepresent CSP and the difference in CSR between sectors.

You can read “The Weighting of CSR Dimensions: One Size Does Not Fit All” from Business & Society free for the next two weeks by clicking here. Want to know all about the latest research from Business & SocietyClick here to sign up for e-alerts!

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gunther_IMG_20150922_164249_b41bfe265c.jpgGunther Capelle-Blancard (PhD, University of Paris 1) is professor of economics at the University of Paris 1 Panthéon-Sorbonne and research fellow at the Centre d’Economie de la Sorbonne and Labex RéFi (Regulation financière). His research examines socially responsible investment, corporate social performance, and financial market regulation. His articles have appeared in such journals as Business Ethics: A European Review, European Financial Management Journal, Journal of Environmental Economics and Management, and Journal of Investing.

Aurélien Petit

Aurélien Petit (PhD, University of Paris 1) is research fellow at the Centre d’Economie de la Sorbonne. His research interests focus on corporate social responsibility and information disclosure strategies.

The Climate Challenge: Special Issue of Business & Society

Business & Society has released a special issue on the important global topic of climate change, corporate strategy, and politics, bringing together articles by a team of scholars from institutions in Australia, Canada, France, the Netherlands, Switzerland, and the United States. Guest editors Chukwumerije Okereke of the University of Reading, Bettina Wittneben of the University of Oxford, and Frances Bowen of Queen Mary University of London authored the introductory essay, titled “Climate Change: Challenging Business, Transforming Politics.” To access all articles in this special issue, please click here.

The abstract:

Climate change challenges contemporary management practices and ways of organizing. While aspects of this challenge have been long recognized, many pertinent dimensions are less effectively articulated. Based on contemporary literature and insights from articles submitted to this special issue, the guest editors of this special issue highlight some of the challenges posed by climate change to government and business, and indicate the range of options and approaches being adopted to address these challenges.

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CSR: An Agenda for the Future

Herman Aguinis, Indiana University, and Ante Glavas, University of Notre Dame, published “What We Know and Don’t Know About Corporate Social Responsibility: A Review and Research Agenda” on March 1, 2012 in the Journal of Management. To view other OnlineFirst articles, please click here.

The abstract:

The authors review the corporate social responsibility (CSR) literature based on 588 journal articles and 102 books and book chapters. They offer a multilevel and multidisciplinary theoretical framework that synthesizes and integrates the literature at the institutional, organizational, and individual levels of analysis. The framework includes reactive and proactive predictors of CSR actions and policies and the outcomes of such actions and policies, which they classify as primarily affecting internal (i.e., internal outcomes) or external (i.e., external outcomes) stakeholders. The framework includes variables that explain underlying mechanisms (i.e., relationship- and value-based mediator variables) of CSR–outcomes relationships and contingency effects (i.e., people-, place-, price-, and profile-based moderator variables) that explain conditions under which the relationship between CSR and its outcomes change. The authors’ review reveals important knowledge gaps related to the adoption of different theoretical orientations by researchers studying CSR at different levels of analysis, the need to understand underlying mechanisms linking CSR with outcomes, the need for research at micro levels of analysis (i.e., individuals and teams), and the need for methodological approaches that will help address these substantive knowledge gaps. Accordingly, they offer a detailed research agenda for the future, based on a multilevel perspective that aims to integrate diverse theoretical frameworks as well as develop an understanding of underlying mechanisms and microfoundations of CSR (i.e., foundations based on individual action and interactions). The authors also provide specific suggestions regarding research design, measurement, and data-analytic approaches that will be instrumental in carrying out their proposed research agenda.

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A Brand New Brand

A Brand New Brand of Corporate Social Performance“, by Tim Rowley, Toronto University and Shawn Berman, Boston University, currently appears as one of the most frequently cited articles in Business and Society, based on citations to online articles from HighWire-hosted articles. Professor Rowley and Professor Berman kindly shared their thoughts about the article.

Do you have any specific memories about doing the research, writing or the review/publishing process that you would like to share?

Reflection brings back faint remembrance of genuine trepidation while writing this article and sweat-dripping fear minutes before presenting it at the inaugural Conversazione at the University of Northern Iowa. Let us set the stage: We were newly-minted faculty members at Boston University and U of Toronto and incredibly grateful and respectful to the pioneers in the field. At the same time, as hungry young scholars conditioned to be overly critical we went at it with both barrels when John Mahon timidly said in that charming way he has, “You little craps are doing a paper about what is wrong with the field. Don’t screw up.”

What prompted you to do this research and write this article?

A key motivation for writing the paper was based on the thought that the business and society scholars had a rare opportunity.  While in other management fields scholars could only report (albeit, in sophisticated ways) how managers had acted, our field could lead practice and provide valuable guidance on the future evolution of business and society interactions.  And that promise depended on truly capturing reality in scholarship. Our worry at the time and purpose for writing the paper was that there was a growing disconnection between operational variables and reality.

Tell the story behind the article.

So, we sketched an outline during a 30 minute cab ride to Chicago O’Hara after an AOM conference, traded countless emails and put a full draft together over a long weekend in Boston.  However, criticizing the field and thus some of the work of the people who had blazed the social issues trail and given us many opportunities seemed dis-loyal.  Also, we had not read or heard some of our claims elsewhere so we questions ourselves – maybe we don’t get it or maybe we were speaking taboo. 

We were wrong – about how people would react, anyway.  Our senior colleagues encouraged our enthusiasm and received our ideas not as criticisms but as suggestions for pushing the field.  This we remember clearly.

Why did the paper receive so much attention?

It is not completely clear to us why this article generated significant interest.  We didn’t say anything that others were not thinking.  In a way we simply recorded the thoughts of the next generation of scholarship.  In fact, Griffin & Mahon, 1997 were already questioning CSP measures. Our ideas were not new, but perhaps timely.  To the credit of many new scholars in the field, research rigor has improved dramatically as operational variables are more substantially grounded with theoretical and operational justification. We are pleased if our article helped in any way, but it is clear the field has moved on making many of our concerns quibbles of the past.  And for that we are most delighted.

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Corporate Social Responsibility

“Corporate Social Responsibility: Evolution of a Definitional Construct” from the September 1999 issue of Business & Society, currently appears in the most read articles list based on full-text and pdf views.

Professor Archie B. Carroll has graciously provided additional information regarding his process in writing the article.

Tell the story behind the article. What prompted you to do this research and write this article?

I wrote this article because the topic of corporate social responsibility (CSR) was central to my thinking, teaching and research and I realized there had not been a history of the concept written before. When I got into the research I was amazed at how many different, varied, but similar, definitional constructs had appeared in the literature. I went back to the 1950s because I concluded that was the beginning of the modern period for CSR.

Why do you think this research is important? Why are people reading it and who else should be exposed to it?

Every year there are a growing number of new scholars coming into the Business and Society field. It is vital for them to know and appreciate what scholars before them had already contributed to the literature. This is so they would not be beginning at ground zero and have to do this research themselves. This article is fairly exhaustive of the literature from the fifties to the nineties. People are reading it because they want to have an appreciation of how this concept has developed over the decades. Scholars around the world have discovered CSR and this article is a quick way to get caught up on the past half decade.

Give us a specific review of the impact of this article. What additional research has this article led to (either your own or other’s)?

Since the article’s publication in 1999 (over a decade ago!) the field has grown significantly. I have gotten many requests for the article from all over the world. This article played a role in my being selected to write an entire book on the History of Corporate Responsibility that is being co-authored by myself, Ken Lipartito, James Post and Patricia Werhane. Kenneth Goodpaster and David Rodbourne of the University of St. Thomas are the editors. The book, which you can learn more about at our website, will be published by Cambridge University Press in 2012. Our book covers the U. S. perspective and a later volume will cover the history of the concept outside the U. S. I sense that scholars are getting more interested in the history and other articles and books are now coming out.

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Non-participation in Controversial Business

“Stakeholder Management and Nonparticipation in Controversial Business” was just published in Business & Society’s Online First. The article was written by Rosamaria C. Moura-Leite, Robert C. Padgett, and Jose I. Galan, all of University of Salamanca, Salamanca, Spain. Rosamaria C. Moura-Leite provides some background on the article:

– Who is the target audience for this article?

This article is targeted at researchers interested in how corporate social performance impacts on organization. Our research added to the numerous efforts researchers have made to further knowledge on this topic, provide knowledge specific on the impact the non-participation in controversial business can have on corporate financial performance.

– What Inspired You To Be Interested In This Topic?

There are several studies that have contributed to our understanding of the effect that corporate social performance has on corporate financial performance, although the non-participation in controversial business construct has therefore been analyzed in only a handful of studies. We identified the need to know more about the instrumental component of firms’ avoidance of controversial businesses.

– Were There Findings That Were Surprising To You?

Yes. The purpose of this paper has been to provide knowledge on the impact that firms’ non-participation in controversial business can have on corporate financial performance. To achieve this objective we adopted two economic measures, a market-based and an accounting-based, since they focus on different aspects of an organization’s financial performance. We expected similar results between the two economic measures, but our empirical evidence demonstrated different results, which gave and added value of our approach to the literature on a different way.

– How Do You See This Study Influencing Future Research And/Or Practice?

Our findings created opportunities for further research focusing on understanding the motivation behind non-participation in controversial business by type of activity. This would be an interesting research topic, because each controversial business activity has different characteristics, and their specific effects on the organization have not been studied profoundly in the literature.

For business managers our study provides empirical proof that non-participation in controversial business impacts positively on a firm’s market performance, so firms have to take into account stakeholders’ opinion regarding any involvement in controversial businesses because it can have a negative impact on their firm.

– How Does This Study Fit Into Your Body Of Work/Line Of Research?

Each of the authors of this research has corporate social performance as a topic in their line of research. Understanding the involvement in controversial business has helped us to improve our comprehension of the relationship between social performance and organizational performance, insights that we can use for other researches.

– How Did Your Paper Change During The Review Process?

The paper had major changes during the revision process. We were lucky to have very competent and highly developmental reviewers and editors, who challenged us to truly create a meaningful contribution to the field.

– What, If Anything, Would You Do Differently If You Could Go Back And Do This Study Again?

We are very happy with the final paper, especially for its acceptance for publication in such a prestigious journal. There is no perfect research; there are always details that can be improved. In our case, we think that the research could have used a larger sample and could have included other control variables such as advertising expenditure, which wasn’t available to us.

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