Shareholders and managers: Who care more about corporate diversity and employee benefits?
- 901 Downloads
We test two competing theories that explain a firm’s engagement in corporate diversity and employee benefits: socially responsible investment theory and management overinvestment theory. We find that publicly-traded companies with strong shareholder rights are more likely to promote women and/or minorities to the positions of CEO and board of directors in their organizations, conduct business with women- and/or minority-owned operations, and provide better family benefits to their employees than firms with strong management power. These findings indicate that the companies with strong shareholder rights engage more actively in internal aspects of CSR activities, which supports the socially responsible investment theory rather than the management overinvestment theory. Shareholders (i.e. institutional investors) tend to integrate their social goals (i.e. internal CSR issues) and financial goals into their investments. In response to these changes, managers should engage in the internal aspects of corporate social issues more aggressively as the agents of shareholders.
KeywordsCorporate social responsibility (CSR) Socially responsible investment (SRI) Corporate diversity Employee benefits Shareholder rights Management power
- Clark, M. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20, 92–117.Google Scholar
- Cox, T. (2001). Creating the multicultural organization: A strategy for capturing the power of diversity. San Francisco: Jossey-Bass.Google Scholar
- Freeman, R. (1984). Strategic management: A stakeholder approach. Boston: Pitman.Google Scholar
- Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.Google Scholar
- Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine.Google Scholar
- Garber, K. (2010). The evolution of an oil giant. US News and World Report, 147, 39–40.Google Scholar
- Gillan, S., & Starks, L. (2003). Corporate governance, corporate ownership, and the role of institutional ownership: A global perspective. Journal of Applied Finance, 13, 4–22.Google Scholar
- Griffin, J., & Koerber, C. (2006). Does industry matter when managing stakeholder relations? In Academy of management meeting proceedings (pp. G1–G6).Google Scholar
- Lorenzo, R. A. (2010). Understanding the ‘Transnational Social’: Soft affirmative action, human rights, and corporate social responsibility in Brazil. Journal of Global and Historical Anthropology, 56, 49–62.Google Scholar
- Marshall, J., & Heffes, E. M. (2006). Diversifying suppliers isn’t costly: Hackett. Financial Executive, 22(9), 12.Google Scholar
- McKinsey and Company. (2007). Women matter: Gender diversity, a corporate performance driver. Paris: McKinsey and Company.Google Scholar
- McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26, 117–127.Google Scholar
- Ning, Y., Davidson, W., & Wang, J. (2010). Does optimal corporate board size exist? An empirical analysis. Journal of Applied Finance, 20, 57–69.Google Scholar
- Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. New York: Harper and Row.Google Scholar
- SIF Foundation. (2012). Report on sustainable and responsible investing trends in the United States, US Social Investment Forum.Google Scholar
- Simpson, W., Carter, D., & D’Souza, F. (2010). What do we know about women on boards? Journal of Applied Finance, 2010, 27–39.Google Scholar
- World Business Council for Sustainable Development. (2000). Making good business sense report. http://www.wbcsd.ch/web/publications/csr2000.pdf.