Strong Social Performance Research Articles

Corporate social performance and the managerial labor market

This paper examines the impact of a firm’s social performance on the CEO’s employment prospects. We find that CEOs are more (less) likely to leave office when there is a significant recent decline (improvement) in social performance. We then track departing CEOs’ subsequent employment records and find that the social performance of their previous employers improves their labor market outcomes. These CEOs are more likely to find a new executive position, move up to a larger public firm, and receive higher compensation from the new public firm. Using a Cox proportional hazard model, we find that the strong social performance of the previous employer helps CEOs find their next executive positions sooner. Overall, our results suggest that corporate social performance enhances CEOs’ labor market potential.

Social Impact Analysis of Products under a Holistic Approach: A Case Study in the Meat Product Supply Chain

Social impact assessment of products can be approached through different methodologies that need to be adapted to the particularities and features of the studied subject. Thus, the Social Life Cycle Assessment methodology can be used to assess different innovative practices of product manufacturing, under a circular economy approach, by identifying potential positive as well as negative impacts along products’ life cycle. This paper presents the results of the Social Life Cycle Impact Assessment of a reference product from the Spanish meat industry using existing and new innovative methods of social impact analysis. Worker discrimination, health and safety for workers, consumers and local community were identified as the social aspects with relevant significance into the business or for the influence on customer’s perception of the products studied. Therefore, results can represent a reference scenario for the future assessment of innovative solutions in the Spanish meet sector. Despite the scarce use of Social Life Cycle Impact Assessment, this case study is a good example of how this innovative kind of assessment can be helpful for companies to identify their weak and strong social performance areas and design strategies to improve in Social Responsibility Management.

Corporate social responsibility and the term structure of CDS spreads

This paper examines the role of corporate social performance in the CDS market, with a focus on the differential effect conditional on the lengths of time horizons. We find that firm’s strong social performance negatively predicts the slope of CDS term structure, by reducing the long-term credit risk and increasing the short-term credit risk. After controlling for credit ratings in a “path analysis”, we find that the direct effect of social performance remains significant, suggesting that CDS market participants incorporate this information more efficiently than credit rating agencies. Furthermore, the effects of social performance are stronger for firms with speculative-grade ratings, smaller size, or less analyst coverage. Our findings remain robust to alternative proxy for credit term structure based on S&P ratings or to the sample without the 2008 Financial Crisis period.

Do Well-Behaved Firms Attract More Market Makers? Evidence from the CDS Market

This paper explores whether corporate social performance impacts CDS market liquidity. We first document that better corporate social performance attracts more CDS market makers and induces more frequent CDS price updates. Second, we explore the influence mechanism of CSR on CDS market liquidity. Cross-sectional analyses show that the effect of CSR on liquidity provision is stronger for firms with smaller sizes, fewer analysts following, higher stock return volatility, higher systematic risk or higher credit risk. These findings are consistent with the notion that strong social performance attracts CDS dealers by reducing information asymmetry or offsetting firm risk. Our findings are robust to controlling for more variables, remain qualitatively similar for three subperiods around the 2008 financial crisis period and are robust to the acquisition of CSR data vendors. To our knowledge, this is the first study to focus on the relation between corporate social responsibility and financial market microstructure.

Corporate Social Performance and Managerial Labor Market

This paper examines the impact of a firm’s social performance on the CEO’s employment prospects. We find that CEOs are more (less) likely to leave office when there is a significant recent decline (improvement) in social performance. We then track departing CEOs’ subsequent employment records and find that the social performance of their previous employers improves their labor market outcomes. These CEOs are more likely to find a new executive position, move up to a larger public firm, and receive higher compensation from the new public firm. Using a Cox proportional hazard model, we find that the strong social performance of the previous employer helps CEOs find their next executive positions sooner. Overall, our results suggest that corporate social performance enhances CEOs’ labor market potentials.

Social Preferences of Investors and Sustainable Investing

I study portfolio sustainability and capital flow dynamics in socially responsible and conventional mutual funds. I document that a large fraction of conventional funds systematically invests sustainably even without a social mandate, while several socially responsible funds persistently green-wash. Both conventional and socially responsible investors value sustainability as they reward sustainable fund portfolios, but they do not punish weak social performance to the same extent that they reward strong social performance. Socially responsible investors respond to portfolio sustainability only when the fund performs poorly financially. As a result, much green-washing goes unpunished. Further, sustainable portfolios do not financially outperform conventional portfolios, suggesting that investors value sustainability for non-economic reasons.

Corporate Social Responsibility and the Term Structure of CDS Spreads

This paper examines the role of corporate social performance in the CDS market, with a focus on the differential effect conditional on the lengths of time horizons. We find that strong social performance is negatively associated with the slope of CDS term structure, by reducing the long-term credit risk and increasing the short-term credit risk. After controlling for credit ratings in a “path analysis”, we find that the direct effect of social performance remains significant, suggesting that CDS market participants incorporate this information more efficiently than credit rating agencies. Furthermore, the effects of social performance are stronger for firms with speculative-grade ratings, smaller size, or less analyst coverage.

Do Contracts Make Them Care? The Impact of CEO Compensation Design on Corporate Social Performance

Using the behavioral agency model, we analyze how two compensation design characteristics, pay-performance sensitivity and duration of CEO compensation (taking into account multiple vesting periods), affect corporate social performance. We find that the performance sensitivity of CEO pay is negatively associated with poor social performance but also negatively affects strong social performance. These results suggest that pay-performance sensitivity increases the relevance of potential negative consequences of poor social performance. However, the ‘insurance’ benefits of strong social performance may also become less relevant. With respect to the duration of CEO compensation, we find that it reduces poor social performance. This finding confirms arguments that a long-term compensation time horizon increases the perceived threat that the negative effects of poor social performance will become visible. With our findings, we integrate behavioral agency theory with the traditional stakeholder views.

The Relation between Accounting Conservatism and Corporate Social Performance: An Empirical Investigation

AbstractAccounting conservatism and corporate social responsibility have received much attention in the recent literature. The current study draws upon Watts, who recognizes that one role of conservatism is to reduce the likelihood of excess wealth transfers to its stakeholder groups and Post et al., who assert that a key aspect of positive corporate social performance is the (equitable) distribution of corporate wealth. Accordingly, this study empirically investigates and finds a positive relation between conservatism and strong social performance.

How corporate social responsibility information influences stakeholders' intentions

AbstractThe study shows how positive and negative information on corporate social and environmental responsibility influences purchase, employment, and investment intentions of various stakeholders. We manipulated the information on corporate social responsibility (CSR) activities of a hypothetical firm in a between‐subjects experimental design. The design had two treatments. In the ‘positive CSR’ treatment, the company's social and environmental performance was described in a positive perspective (depicting a strong social performance), whereas in the ‘negative CSR’ treatment it was described in a negative perspective (depicting a weak social performance). In both treatments, information about other key characteristics of the focal company were kept constant. Respondents' intentions to purchase products from, seek employment with, and invest in the company were evaluated by multi‐item scales. The results demonstrate that positive CSR information about a firm enhances consumers' intentions to purchase products from, potential employees' intentions to seek employment with, and potential investors' intentions to invest in the company. Theoretical and managerial implications of the findings are discussed. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.

La microfinance risque de renier son inspiration humaniste

Behind the naïve devotion expressed by the media during the international year of microcredit, recent events show that we do not have a consensus on a robust methodology to assess the advantages and disadvantages of different microfinance models.The question of social performance is crucial as the financial markets are increasingly dominating the sector. But evaluating the social performance of microfinance provokes strong responses. The violence of the discourse may be a symptom of underlying anxiety. The humanist consensus is no longer sufficient to justify microfinance.One of the results of the International Year of Microcredit was to convince large international banks and asset managers that the microfinance sector offers returns on investment. And the Consultative Group to Assist the Poorest (CGAP) is clear: microfinance institutions (MFIs) must above all free themselves from public subsidies. But CGAP admitted in 2004 that of 7,000 MFIs, only 100 are profitable and have access to international financial markets.The big retail banks see their involvement in microfinance as an opportunity to explore new markets, to create better clients and to test new tools such as credit scoring. The developed world, with its significant financial assets and low returns on investment, sees investing in mature MFIs as an opportunity for increasing profits.The ideal of high returns while investing in microfinance is called into question by MFIs social performance evaluation. Experience shows that private capital, by bringing finance to the sector, increases the pressure to generate profits. It is important therefore to assess whether there is a link between financial pressure for returns and MFIs practices, and whether social objectives are compatible with financial ones. In 2005, representatives of 23 countries and several national networks made a declaration of principle on social performance. The declaration said that to meet large numbers of poor successfully, microfinance must be guided by strong financial and strong social performance objectives, which mutually reinforce one another. In addition, MFIs must behave in a socially responsible manner towards their staff and clients. The main question is how to translate an MFI’s social mission into practice.Work on social performance has barely begun and already there are two new challenges that go beyond the question of social performance. These challenges are systematic and societal.

CEO Incentives and Corporate Social Performance

This paper examines the relationship between CEO incentives and strong and weak corporate social performance. Using the KLD database we find that incentives have no significant relationship with strong social performance. Salary and long-term incentives have a positive association with weak social performance.