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Does Equity Ownership Matter for Corporate Social Responsibility? A Literature Review of Theories and Recent Empirical Findings

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Abstract

Based on the concept of shareholder primacy, many scholars have argued that it is more important for businesses to earn profits for their shareholders than to provide benefits to society at large. Corporate social responsibility (CSR) is often regarded as an investment that comes at the expense of shareholders. In contrast, research analyzing the connections between the equity ownership structure of a company and its level of CSR engagement suggests that CSR offers benefits to shareholders that go beyond direct financial returns from investments. This study provides a comprehensive review and systematic assessment of theoretical considerations and approaches regarding different forms of equity ownership and their relationships to CSR, and it discusses the relevant benefits and motivations of shareholders. The perceived value of these CSR benefits varies among different types of shareholders, as they assign unequal values to short-term financial or to rather long-term CSR benefits. Based on a literature sample of 146 publications, this review demonstrates central problems inherent in previous analyses. Given the ambiguous and partially contradictory findings of prior research, this study identifies potential moderating influences that help clarify empirical evidence. A contingency approach is suggested in future research, as this can help resolve the problem of contradictory empirical findings and theoretical arguments.

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Notes

  1. The most frequently cited definition of CSR was developed by Carroll (1979), p. 500), as follows: “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.”

  2. The term gained broader popularity after the publication of the WCED report (1987, p. 37), which states that “Sustainable development […] meets the needs of the present without compromising the ability of future generations to meet their own needs.”

  3. In line with this assumption, Aguinis and Glavas (2012) assume that CSR represents organizational actions that consider the triple bottom line of business, as well as several stakeholders’ expectations.

  4. The literature provides even more terms in this regard. A detailed discussion of concepts like CSR, CS, corporate social performance, or corporate citizenship is beyond the scope of this review. However, the basic considerations inherent in these concepts can be assumed to be captured in a general approach that comprises social, environmental, and economic aspects (Montiel 2008; Waddock 2004).

  5. EBSCOhost databases and discovery technologies are online information resources available to worldwide institutions (http://www.ebscohost.com/).

  6. Econis is the online catalog of the ZBW—The Leibniz Information Center for Economics, at the main German National Library of Economics (source: http://www.econis.eu/).

  7. Another concept mentioned in the literature is philanthropy. However, as this concept is rather narrowly defined (Godfrey 2005) and can be considered part of CSR, it is not explicitly considered here as a search term (Carroll and Shabana 2010; Chai 2010; Lockett et al. 2006; Montiel 2008).

  8. A complete tabular overview of all empirical studies in the literature sample, the respective company samples that we analyzed, and the variables used therein, as well as the basic findings, are available from the authors upon request.

  9. For a detailed discussion of the problems that stem from the separation of ownership and control, please refer to Berle and Means (1933), Demsetz (1983), or Holderness and Sheehan (1988), among others.

  10. Classical agency theory is based on two basic assumptions. First, principals and agents behave according to self-interest; second, that they are both able to form rational expectations of future wealth (Barnea et al. 1981). For a detailed description, see Jensen and Meckling (1976). Due to mixed empirical findings, Bosse and Phillips (2014) offer a more nuanced explanation by assuming boundedly self-interested behavior. Based on different fields of research whose literature indicates that self-interest is bounded by norms of fairness, they assume that actors do behave in a self-interested manner, inasmuch as perceived norms of fairness are not violated by this behavior.

  11. In 2002, for example, the British Institutional Shareholders’ Committee issued the revised Statements of Principles for Institutional Shareholders and Agents, which concern a firm’s approach to CSR. The Association of British Insurers issued in 2001 its Disclosure Guidelines on Socially Responsible Investment (Aguilera et al. 2006).

  12. In Germany, roughly 95 % of all businesses are family firms (Schäfer and Goldschmidt, 2010); in the United States, around 80 % of businesses can be considered family firms (Gomez-Mejia et al. 2007; Stavrou et al. 2007).

  13. Several studies investigate the characteristics that vary within a group of family shareholders. Marques et al. (2014) and Deniz and Suarez (2005) find differences in value systems regarding commitment and identification, and in CSR approaches. Campopiano et al. (2014b) show differences based on the level of involvement in management, and Delmas and Gergaud (2014) and Dou et al. (2014) highlight the role of future generations as additional stakeholders. This review cannot consider in detail all characteristics, nor other CSR studies that compare the relationships among different types of shareholders.

  14. Compare http://product.datastream.com/Navigator/HelpFiles/DatatypeDefinitions/en/0/NOSHEM.htm, for a definition of the variable “Free Float Employee/Family Held.”

  15. The above arguments regarding heterogeneity within equity-owner groups still need to be taken into account. Moreover, Phillips et al. (2010) argue that managerial discretion may impact orientation to stakeholder demands. However, stakeholder orientation may again have an effect on whether stakeholders will act to constrain or facilitate later managerial discretion.

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  1. Department of Strategic Leadership and Global Management, Technische Universität Berlin, Straße des 17. Juni 135/H92, 10623, Berlin, Germany

    Christian M. Faller

  2. Chair of Strategic Leadership and Global Management, Technische Universität Berlin, Straße des 17. Juni 135/H92, 10623, Berlin, Germany

    Dodo zu Knyphausen-Aufseß

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Faller, C.M., zu Knyphausen-Aufseß, D. Does Equity Ownership Matter for Corporate Social Responsibility? A Literature Review of Theories and Recent Empirical Findings. J Bus Ethics 150, 15–40 (2018). https://doi.org/10.1007/s10551-016-3122-x

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