corporate responsibility
Preliminary Draft - Comments Welcome
CORPORATE SOCIAL RESPONSIBILITY: DOING WELL BY DOING
GOOD?*
RAY FISMAN
GEOFFREY HEAL
VINAY B. NAIR#
Abstract
We provide a framework for analyzing corporate social responsibility
(CSR). Our model of CSR in this paper has two important ingredients –
CSR is at least in part a profit motivated decision; and different CSR activities are aimed at different audiences. We examine the implications of our framework using a ‘visible’ CSR index that captures consumeroriented CSR. We find that CSR is more prevalent in advertisingintensive (consumer-oriented) industries, and CSR is more positively related to profitability in these industries. Further, the effect of CSR on profits is stronger in competitive industries, especially when few other firms undertake such actions, suggesting that CSR may be used as a means of differentiation in otherwise competitive environments. We also find tentative evidence that the profit effects of CSR are more positive when large external shareholders are on the board. Finally, we document that different types of CSR activities targeted toward different audiences appear to be unrelated.
*
The authors thank Franklin Allen, Randall Morck, Michael Roberts and Jeremy Stein for discussions.
#
Fisman and Heal are at the Graduate School of Business, Columbia University and Nair is at The Wharton School, University of Pennsylvania.
1
In the business community, Corporate Social Responsibility (CSR) has emerged as a significant theme.1 While the growing emphasis on CSR is affecting the relationship between companies and their various stakeholders - investors, customers, vendors, suppliers, employees, communities and governments - there is little agreement on the causes or effects of CSR, let alone a consensus on what CSR is.
This lack of a well-defined analytical framework generates difficulties in the study of CSR, since the term seems to have different connotations to
CORPORATE SOCIAL RESPONSIBILITY: DOING WELL BY DOING
GOOD?*
RAY FISMAN
GEOFFREY HEAL
VINAY B. NAIR#
Abstract
We provide a framework for analyzing corporate social responsibility
(CSR). Our model of CSR in this paper has two important ingredients –
CSR is at least in part a profit motivated decision; and different CSR activities are aimed at different audiences. We examine the implications of our framework using a ‘visible’ CSR index that captures consumeroriented CSR. We find that CSR is more prevalent in advertisingintensive (consumer-oriented) industries, and CSR is more positively related to profitability in these industries. Further, the effect of CSR on profits is stronger in competitive industries, especially when few other firms undertake such actions, suggesting that CSR may be used as a means of differentiation in otherwise competitive environments. We also find tentative evidence that the profit effects of CSR are more positive when large external shareholders are on the board. Finally, we document that different types of CSR activities targeted toward different audiences appear to be unrelated.
*
The authors thank Franklin Allen, Randall Morck, Michael Roberts and Jeremy Stein for discussions.
#
Fisman and Heal are at the Graduate School of Business, Columbia University and Nair is at The Wharton School, University of Pennsylvania.
1
In the business community, Corporate Social Responsibility (CSR) has emerged as a significant theme.1 While the growing emphasis on CSR is affecting the relationship between companies and their various stakeholders - investors, customers, vendors, suppliers, employees, communities and governments - there is little agreement on the causes or effects of CSR, let alone a consensus on what CSR is.
This lack of a well-defined analytical framework generates difficulties in the study of CSR, since the term seems to have different connotations to
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