A central and contentious debate in many literatures concerns the relationship between financial and social performance. We advance this debate by measuring the financial-social performance link within mutual funds that practice socially responsible investing (SRI). SRI fund managers have an array of social screening strategies from which to choose. Prior studies have not addressed this heterogeneity within SRI funds. Combining modern portfolio and stakeholder theories, we hypothesize that the financial loss borne by an SRI fund due to poor diversification is offset as social screening intensifies because better managed and more stable firms are selected into its portfolio. We find support for this hypothesis through an empirical test on a panel of 61 SRI funds from 1972-2000. The results show that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that two long-competing viewpoints may be complementary. Furthermore, we find that financial performance varies with the types of social screens used. Community relations screening increased financial performance, but environmental and labor relations screening decreased financial performance. Based on our results, we suggest that literatures addressing the link between financial and social performance move toward in-depth examination of the merits of different social screening strategies, and away from the continuing debate on the financial merits of either being socially responsible or not.

Beyond dichotomy: the curvilinear relationship between social responsibility and financial performance

Prior research has suggested that corporate social responsibility (CSR) contributes to organisations' competitive advantage by influencing stakeholders' attitudes. While existing research indicates that CSR relates to some employee outcomes, the mechanisms that drive employees' responses to CSR initiatives remain largely unexplored. This study relies on social identity theory to propose and test a model with 181 hospital employees that attempts to explain why and how CSR can positively influences employees' attitudes. Specifically, this study examines the impact of two aspects of an organisation's socially responsible behaviours, i.e. employees' perceptions of CSR initiatives directed at internal and external stakeholders, on employees' job satisfaction. The findings indicate that perceived CSR relates positively to job satisfaction through its effects on overall justice perceptions and organisational identification. These results suggest that employees appear to use CSR initiatives to assess their organisation's character and identify with it. Accordingly, CSR initiatives have particular importance as a mean to support organisational efforts to create strong relationships with their employees and thereby improve their attitudes at work.

Understanding employees' responses to corporate social responsibility: mediating roles of overall justice and organizational identification

CEO narcissism and corporate social responsibility: Does CEO narcissism affect CSR focus?

Extant research provides compelling conceptual and empirical arguments that company-external (e.g., philanthropic) as well as company-internal (i.e., employee-directed) CSR efforts positively affect employees, but does so largely in studies assessing effects from the two CSR types independently of each other. In contrast, this paper investigates external–internal CSR jointly, examining the effects of (in)consistent external–internal CSR strategies on employee attitudes, intentions, and behaviors. The research takes a social and moral identification theory view and advances the core hypothesis that inconsistent CSR strategies, defined as favoring external over internal stakeholders, trigger employees’ perceptions of corporate hypocrisy which, in turn, lead to emotional exhaustion and turnover. In Study 1, a cross-industry employee survey (n = 3410) indicates that inconsistent CSR strategies with larger external than internal efforts increase employees’ turnover intentions via perceived corporate hypocrisy and emotional exhaustion. In Study 2, a multi-source secondary dataset (n = 1902) demonstrates that inconsistent CSR strategies increase firms’ actual employee turnover. Combined, the two studies demonstrate the importance of taking into account the interests of both external and internal stakeholders of the firm when researching and managing CSR.

Scrooge Posing as Mother Teresa: How Hypocritical Social Responsibility Strategies Hurt Employees and Firms

Environmental, health, and social change is complex and frequently is framed as a problem(s) to be solved. This framing focuses effort on delivery of solutions designed to change systemic environme...

Social marketing theory development goals: an agenda to drive change

As past research has identified frontline employees as the primary communicators of a company’s CSR, this paper reports on a large-scale quasi-field experiment aimed at gaining a deeper understanding of the levers of successful in-store, point-of-sale, CSR communication. In cooperation with a large international retailer, the authors analyzed the effects of varying in-store CSR communication strategies in 48 unique stores, combining data from a customer survey (N = 38,999), company records of customers’ real visits and purchases, and interviews with store managers. Taking into account the nested structure of the data, the authors reveal that CSR-related training of frontline employees bestows its favorable effect on customers and customer behavior only if it is accompanied by the store managers’ personal support for CSR.

Frontline Employees as Corporate Social Responsibility (CSR) Ambassadors: A Quasi-Field Experiment

Partners in crime? The impact of consumers' culpability for corporate social irresponsibility on their boycott attitude

Listen to the voice of the customer—First steps towards stakeholder democracy

In communicating their good deeds to customers, most companies focus on company-external discretionary Corporate social responsibility (CSR) activities such as philanthropy. In contrast with this prevailing managerial practice, the present paper proposes that customers react less positively to communications on how companies allocate profits to company-external good causes and more positively to communications on how companies make their profits in the first place, i.e., how they treat their employees. A preliminary study among customers of an international retailer (N = 11,587) suggests that customers perceive the domain of employee CSR to be significantly more important than other CSR domains. Based on a qualitative study using focus-group interviews, the authors propose that employee support CSR messages elicit the highest intrinsic attributions among customers and enhance customer identification with the company. A large-scale field experiment of customers of the focal retailer (N = 5,586) delivers evidence that supports these propositions for four real CSR communication messages from different CSR domains. More specifically, the study results suggest that an employee support message elicits the most positive customer responses, not only by increasing attributions of the company's intrinsic motives for engaging in CSR but also by increasing customer identification with the company.

Sabrina Scheidler

Papers

Scrooge Posing as Mother Teresa: How Hypocritical Social Responsibility Strategies Hurt Employees and Firms

Frontline Employees as Corporate Social Responsibility (CSR) Ambassadors: A Quasi-Field Experiment

Partners in crime? The impact of consumers' culpability for corporate social irresponsibility on their boycott attitude

Listen to the voice of the customer—First steps towards stakeholder democracy

Tell me how you treat your employees