Business Exposed212
niceties may also appeal to your customers, to green investors,
will make you more attractive as an employer, and so on. And
apparently these costs and benets seem to largely average out so
at least there seems no reason not to be a good guy! However, it
would still be nice if the socially responsible types were actually
better off wouldn’t it . . .
Professors Paul Godfrey, Craig Merrill, and Jared Hansen,
from Brigham Young University and the University of North
Carolina, came up with a clever insight into why socially
responsible types may be better off after all. They didn’t just
look at the social and nancial performance of all sorts of
companies, but decided to specically focus on companies
that got into trouble because of some negative event that had
happened to them. This could be the initiation of a lawsuit
against the rm (e.g., by a customer), the announcement of
regulatory action (e.g. nes, penalties) by a government entity,
and so on. Then they measured what happened to the share
price of the company as result of the event. And the interesting
thing was that how much you were punished by the stock
market for the negative news depended very much on how
socially responsible you were.
Firms that scored low on a social responsibility index saw their
share price plummet if they had to announce a negative event.
Firms with very good social track records did not see the same
fall in share price. Paul, Craig, and Jared concluded that, appar-
ently, your social responsibility reputation acts as some sort of
an insurance; when something bad happens to you, investors
conclude that you probably made a genuine mistake, and that
you will denitely do better next time, and that there is nothing
structurally wrong with you or to worry about. However, when
you are much more of a social villain, the stock market washes its
hands of you, drops its nancial support, and makes your share
price plummet.
Thus, good guys are better off after all. And the dollars you spent
on being socially responsible are paid back and turn into prot,
especially when you are in a rut.