Abstract
This study examines the effects of labor union influence on the corporate social responsibility (CSR) of Korean firms, which is regarded as a pertinent sustainable factor to meet the various demands of the organizations around a firm. Further, this paper implies that labor unions might be part of a group of stakeholders that affect firms’ CSR activity. The empirical results suggest labor union existence as well as the labor unionization ratio is negatively associated with firms’ CSR activity. Additionally, this negative association is more pronounced for non-owner manager firms. Additional robustness tests using quantile regression, two-stage least squares (2SLS) regression, and the Heckman two-step analysis support the above findings. Therefore, we conclude that labor unions might cooperate with non-owner managers to decrease firms’ CSR activity because decreasing CSR expenditure makes for a favorable wage negotiation process that advocates labor unions’ rent seeking behavior and non-owner managers’ agreement with labor unions in terms of business performance during their tenure.
Highlights
This study examines whether labor unions affect firms’ corporate social responsibility (CSR) in the Korean market
Using 675 firm-year observations for 2005–2008, we suggest labor union existence and the labor unionization rate are negatively associated with the level of CSR activity
We find evidence that the managers of firms that have labor unions and higher labor unionization rates are more likely to decrease CSR, as the empirical results suggest labor union existence and the labor unionization rate are negatively associated with the CSR level
Summary
This study examines whether labor unions affect firms’ corporate social responsibility (CSR) in the Korean market. Prior studies investigate managerial ownership [7], foreign ownership [8], institutional ownership [9], and board structure [7] using CSR activity We extend this stream of literature by examining another important stakeholder group around the firm: labor unions. To the best of our knowledge, this is the first empirical attempt to show the direct association between firm-year-level labor union influence and the level of CSR activity, using owner and non-owner manager groups, while prior CSR papers focused on CSR with ownership structure or board composition. This paper might be the first relative empirical study to show labor union influence and firms’ CSR activity in the firm-year-level context. This influence has effects on the owner and non-owner manager groups.
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