Buying CSR with employees’ pensions? The effect of social responsible investments on Norwegian SMEs’ choice of pension fund management

Abstract

PurposeEmployees often expect an emphasis on financial aspects to be predominant when their employers choose a fund management company for the investment of employees’ pension fund deposits. By contrast, in an attempt to appear as socially responsible company managers may emphasize social responsibility (SR) in pension fund choices. The purpose of this paper is to examine to what extent managers for small- and medium-sized companies emphasize SR vs expected returns when choosing investment managers for their employees’ pension funds.Design/methodology/approachA conjoint experiment among 276 Norwegian SMEs’ decision makers examines their trade-offs between social and financial goals in their choice of employees’ pension management. Furthermore, the study examines how the companies’ decision makers’ characteristics influence their pension fund management choices.FindingsThe findings show that the employers placed the greatest weight to suppliers providing funds adhering to socially responsible investment (SRI) practices, followed by the suppliers’ corporate brand credibility, the funds’ expected return, and the suppliers’ management fees. Second, employers with investment expertise emphasized expected returns and downplayed SR in their choice, whereas employers with stated CSR-strategies downplayed expected return and emphasized SR.Originality/valueChoice of supplier to manage employees’ pension funds relates to a general discussion on whether companies should do well – maximizing value, or do good, – maximizing corporate SR. In this study, doing well means maximizing expected returns and minimizing costs of the pension investments, whereas doing good means emphasizing SRI in this choice. Unfortunately, the employees might pay a price for their companies’ ethicality as moral considerations may conflict with maximizing the employees’ pension fund value.