Business Exposed210
I’ve long thought that, for example, an investment bank that
was able to come up with a formula that enables people to have
a real career without working 70 hours or even ve days per
week should be able to turn that into a momentous competitive
advantage in their industry (and it actually doesn’t seem that
hard to do). But macho culture and self-delusion – and not
much else – always seems to stand in the way of developing
such a practice. What Michelle’s study suggests is that such rms
are simply stuck in the 1980s; nowadays even the stock market
recognizes the sheer monetary value of work–family initiatives.
It’s time to wake up, I’d say, and join the new millennium. Because
if you don’t, you’re actually destroying shareholder value, and
that’s not a very macho and serious thing to do, now is it?
Corporate social responsibility – nice, but does it
earn you any money?
The view of organizations as communities naturally spills over
into the question of whether they should do good or even
2118
n
A rock or a soft place?
contribute to the larger community. The corollary question,
“Should corporations actively invest in socially responsible
stuff, or should they simply focus on making money?” continues
to linger and re-emerge on the business agenda (especially, it
seems, around the time that corporate socialites swarm to
Davos).
People are then quick to shout, “But they are not two different
things; behaving in a socially responsible way will, in the long
run, also make you better off nancially!” but, in spite of the
latest tally of 225 academic studies trying to provide hard
evidence of the existence of that relationship, proof of that
statement is unfortunately actually pretty hard to nd . . .
And I say “unfortunately” because it would be nice if socially
responsible companies were also nancially rewarded for their
honorable endeavors. But it is hard to provide solid evidence for
that. For example, although we know from research that socially
responsible companies are usually the better performers, the
tricky thing is that, as we say, the causality often seems to run the
other way around; once rms start to make a healthy prot, they
start acting in socially responsible ways. If
losses pile up, the responsible stuff is the rst
to go out of the door. Hence, socially respon-
sible behavior does not make you a better
performer; good nancial performance leads
rms to behave in more responsible ways. It
seems it is a luxury behavior that we only
indulge in if we feel we can afford it.
However, on the bright side, there is certainly no evidence that
rms acting in socially responsible ways perform more poorly as
a result! So, if it doesn’t cost you anything, why not do it? Yep,
you will have to spend a bit more money, not using suppliers
who employ children to produce their stuff, recycling your toxic
waste although you could legally have dumped it somewhere
else, and invest in some services for your local community and
the family of your employees, although you could have told
them to bugger off and take care of themselves. However, these
‘‘
good financial
performance leads
firms to behave in
more responsible
ways
’’
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.
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