A selection of interesting research and articles we found recently.
Does it pay to be ethical?
Yes, according to Elina Riivari and Anna-Maija Lämsä, who examined the relationship between ethical organisational culture and organisational innovativeness. They conducted a quantitative empirical survey of a 719 respondents from all levels of three Finnish organisations, both general staff and managers, from both private and public sectors. Results show that organisations’ ethical culture is associated with organisational innovativeness, and that different dimensions of ethical culture are associated with different dimensions of organisational innovativeness. The ethical culture of the organisation had a specific role in process and behavioural innovativeness. It was found that congruency of management was the single dimension with the highest effect on organisational innovativeness overall and specifically on process and behavioural innovativeness. These findings suggest that when organisations are aiming for specific outcomes, such as organisational innovativeness, they need to be aware of which dimensions of ethical culture are particularly relevant.
Further details are in: Riivari, Elina and Lämsä, Anna-Maija. Does it Pay to Be Ethical? Examining the Relationship Between Organisations’ Ethical Culture and Innovativeness, Journal of Business Ethics, 2014, 124(1), 1-17.
Does targeting different stakeholders with CSR pay off for corporations?
It depends, according to Kiyoung Chang, Incheol Kim and Ying Li, who found that CSR activities have a unique impact on firm risk and financial performance for different stakeholder groups. More specifically, the authors demonstrated that institutional CSR activities that target secondary stakeholders are negatively associated with firm risk (total risk and systematic risk). However, CSR activities that target primary stakeholders are positively associated with firm financial performance, measured by Tobin’s Q, ROA, and cash flow returns. The sample consisted of S&P 500 firms assessed between 1995–2009. The authors argue that their results are consistent with the risk management view of “altruistic” CSR activities and with stakeholder salience theory. Numerous other detailed analyses were reported, and the researchers state that their findings are maintained under alternative CSR, risk and performance measures.
For further details see: Kiyoung Chang, Incheol Kim and Ying Li. 2014. The Heterogeneous Impact of Corporate Social Responsibility Activities That Target Different Stakeholders. Journal of Business Ethics, 125(2), 211-234.
Does screening socially responsible stock hurt outcomes?
Jacquelyn Humphrey and David Tan asked whether excluding “sin stocks” from a portfolio creates performance problems, and does this negative screening reduce performance and increase risk? On the flip side, will incorporating stocks of firms with positive social responsibility scores (positive screening) improve performance and reduce risk? They found in portfolios matched on many criteria (such as manager experience) no difference between returns or risk in screened and unscreened portfolios. The authors concluded that a typical socially-responsible fund will neither benefit nor be hurt financially or in terms of risk from screening its portfolio.
The study is elaborated on in Humphrey, Jacquelyn E. and Tan, David T. Does it Really Hurt to be Responsible? Journal of Business Ethics, 2014, 122(3), 375-386.
Capital markets see sustainability positively after the GFC
Using a data provided by an international rating agency, Kerstin Lopatta and Thomas Kaspereit investigated the effects of corporate sustainability and industry-related exposure to environmental and social risks on the market value of MSCI World firms. The results show a negative relationship in the earlier years of their sample period, but a change in capital market perception of sustainability followed the financial crisis. After the Lehman Brothers collapse, the previously negative perception of corporate sustainability across its various dimensions was positively affected and offset. The crisis led to a positive perception of corporate sustainability in industries exposed to higher environmental and social risks. The authors recommend that executives, in particular those in industries with high environmental and social risks, should increase their commitment to corporate sustainability.
Read more in Lopatta, Kerstin and Kaspereit, Thomas. The World Capital Markets’ Perception of Sustainability and the Impact of the Financial Crisis. Journal of Business Ethics, 2014, 122(3), 475-500.
Are Corporate Social Responsibility standards paradoxical?
Simone de Colle, Adrian Henriques and Saras Sarasvathy constructively criticize Corporate Social Responsibility (CSR) standards. CSR standards have both benefits and limitations to their effectiveness from both theoretical and empirical perspectives, yielding a Paradox of CSR standards. The paradox lies in that despite being well-intended, CSR standards can favour the emergence of a thoughtless, blind and blinkered mindset that works against enhancing an organisation’s social responsibility.
The authors identify three problems that might underlie the paradox—deceptive measurements; responsibility erosion and blinkered culture. Applying the philosophical tradition of American Pragmatism, the writers reflect on these issues in relation to existing standards, and conclude with suggestions for helping both developers and users of CSR standards to address the paradox.
For more information, see: Simone de Colle, Adrian Henriques and Saras Sarasvathy. 2014. The Paradox of Corporate Social Responsibility Standards. Journal of Business Ethics, 125(2), 177-191.