The association between corporate social-responsibility and financial performance: The paradox of social cost
- Cite this article as:
- Pava, M.L. & Krausz, J. J Bus Ethics (1996) 15: 321. doi:10.1007/BF00382958
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It is generally assumed that common stock investors are exclusively interested in earning the highest level of future cash-flow for a given amount of risk. This view suggests that investors select a well-diversified portfolio of securities to achieve this goal. Accordingly, it is often assumed that investors are unwilling to pay a premium for corporate behavior which can be described as “socially-responsible”.
Recently, this view has been under increasing attack. According to the Social Investment Forum, at least 538 institutional investors now allocate funds using social screens or criteria. In addition, Alice Tepper Marlin, president of the New York-based Council on Economic Priorities has recently estimated that about $600 billion of invested funds are socially-screened (1992).