Advertisement

Journal of Business Ethics

, Volume 76, Issue 1, pp 35–53 | Cite as

Corporate Ethical Identity as a Determinant of Firm Performance: A Test of the Mediating Role of Stakeholder Satisfaction

  • Pascual Berrone
  • Jordi Surroca
  • Josep A. Tribó
Article

Abstract

In this article, we empirically assess the impact of corporate ethical identity (CEI) on a firm’s financial performance. Drawing on formulations of normative and instrumental stakeholder theory, we argue that firms with a strong ethical identity achieve a greater degree of stakeholder satisfaction (SS), which, in turn, positively influences a firm’s financial performance. We analyze two dimensions of the CEI of firms: corporate revealed ethics and corporate applied ethics. Our results indicate that revealed ethics has informational worth and enhances shareholder value, whereas applied ethics has a positive impact through the improvement of SS. However, revealed ethics by itself (i.e. decoupled from ethical initiatives) is not sufficient to boost economic performance.

Keywords

business ethics corporate ethical identity financial performance stakeholder satisfaction stakeholder theory 

Abbreviations

CEI

corporate ethical identity

CRE

corporate revealed ethics

CAE

corporate applied ethics

SiRi

sustainable investment research international

KLD

Kinder, Lyndenburg, Domini Research and Analytics Inc.

SS

stakeholder satisfaction

CFP

corporate financial performance

MVA

market value added

ROA

return on assets

R&D

research and development

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. B. R. Agle, Mitchell R. K., Sonnenfeld J. A. (1999) Who Matters to Managers? An Investigation of Stakeholder Attributes and Salience, Corporate Performance, and Manager Values. Academy of Management Journal 42(5):507–525CrossRefGoogle Scholar
  2. Balmer J. M. T. (1998) Corporate Identity and the Advent of Corporate Marketing, Journal of Marketing Management 14:963–996CrossRefGoogle Scholar
  3. Balmer J. M. T. (2001) Corporate Identity, Corporate Branding and Corporate Marketing - Seeing Through the Fog, European Journal of Marketing 35(3/4):248–291CrossRefGoogle Scholar
  4. Balmer J. M. T., E. R. Gray (2000) Corporate Identity and Corporate Communications: Creating a Competitive Advantage, Industrial and Commercial Training 32(7):256CrossRefGoogle Scholar
  5. Balmer J. M. T., E. R. Gray (2003) Corporate Brands: What are they? What of them? European Journal of Marketing 37(7/8):972–997CrossRefGoogle Scholar
  6. Baron R., D. Kenny (1986) The Moderator-Mediator Variable Distinction in Social Psychologicalresearch: Conceptual, Strategic and Statistical Considerations, Journal of Personality and Social Psychology 51:173–182CrossRefGoogle Scholar
  7. Berk R. A. (1990). A Primer on Robust Regression, In: J. Fox, J. S. Long (Eds.), Methods of Data Analysis, Newburry Park, CA, Sage Publications, pp. 292–324Google Scholar
  8. Berman S. L., A. C. Wicks, S. Kotha, T. M. Jones (1999) Does Stakeholder Orientation Matter? The Relationship between Stakeholder Management Models and Firm Financial Performance. Academy of Management Journal 42(5):488–506CrossRefGoogle Scholar
  9. Carroll A. B. (1979) A Three-Dimensional Conceptual Model of Corporate Performance, Academy of Management Review 4(4):497–505CrossRefGoogle Scholar
  10. Clarkson M. B. E. (1995) A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance, Academy of Management Review 20(1):92–117CrossRefGoogle Scholar
  11. Cragg W. (2002) Business Ethics and Stakeholder Theory, Business Ethics Quarterly 12(2):113–142Google Scholar
  12. Das T. K. (2005) How Strong are The Ethical Preferences of Senior Business Executives? Journal of Business Ethics 56(1):69–80CrossRefGoogle Scholar
  13. Deephouse D. L. (2000) Media Reputation as a Strategic Resource: An Integration of Mass Communication and Resource-Based Theories, Journal of Management 26(6):1091–1112CrossRefGoogle Scholar
  14. Donaldson T. (1999) Making Stakeholder Theory Whole, Academy of Management Review 24(2):237–241CrossRefGoogle Scholar
  15. Donaldson T. (2003) Editor’s Comments: Taking Ethics Seriously – A Mission Now More Possible, Academy of Management Review 28(3):363–366Google Scholar
  16. Donaldson T., T. W. Dunfee (1994) Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory, Academy of Management Review 19(2):252–284CrossRefGoogle Scholar
  17. Donaldson T., L. E. Preston (1995) The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications, Academy of Management Review 20(1):65–91CrossRefGoogle Scholar
  18. Evan W., E. R. Freeman (1983). A Stakeholder Theory of the Modern Corporation: Kantian Capitalism. In: T. Beauchamp, N. Bowie (Eds.), Ethical Theory in Business, Englewood Cliffs, NJ, Prentice-Hall, pp. 75–93Google Scholar
  19. Ferrell O. C., J. Fraedrich, L. Ferrell (2000) Business Ethics, Boston, Houghton MifflinGoogle Scholar
  20. Fisher J. (2004) Social Responsibility and Ethics: Clarifying the Concepts. Journal of Business Ethics 52(4):391–400CrossRefGoogle Scholar
  21. Fombrun C. J. (1996) Reputation: Realising Value From the Corporate Image. Boston, Massachusetts, Harvard Business School PressGoogle Scholar
  22. Fombrun C. J., C. Foss (2004) Business Ethics: Corporate Responses to Scandal, Corporate Reputation Review 7(3):284–288CrossRefGoogle Scholar
  23. Fombrun C. J., N. A. Gardberg, M. L. Barnett (2000) Opportunity Platforms and Safety Nets: Corporate Citizenship and Reputational Risk, Business and Society Review 105(1):85–106CrossRefGoogle Scholar
  24. Fombrun C. J., M. Shanley (1990) What is in a Name? Reputation Building and Corporate Strategy, Academy of Management Journal 33(2):233–256CrossRefGoogle Scholar
  25. Freeman E. R. (1984) Strategic Management: A Stakeholder Approach. Englewood Cliffs, N.J, Prentice HallGoogle Scholar
  26. Freeman E. R. (1999) Divergent Stakeholder Theory, Academy of Management Review 24(2):233–236CrossRefGoogle Scholar
  27. Freeman E. R., J. McVea (2001). A Stakeholder Approach to Strategic Management. In: M. Hitt, E. R. Freeman, J. Harrison (eds.), Handbook of Strategic Management. Oxford, U.K., Blackwell Publishing, pp. 189–207Google Scholar
  28. Friedman M. (1970) The Social Responsibility of Business is to Increase its Profits, New York Times Magazine 13:32–33Google Scholar
  29. Fritz J. M. H., R. C. Arnett, M. Conkel (1999) Organizational Ethical Standards and Organizational Commitment, Journal of Business Ethics 20(4):289–299CrossRefGoogle Scholar
  30. Garriga E., D. Melé (2004) Corporate Social Responsibility Theories: Mapping the Territory, Journal of Business Ethics 53(1–2):51–71CrossRefGoogle Scholar
  31. Gibson K. (2000) The Moral Basis of Stakeholder Theory, Journal of Business Ethics 26(3):245–257CrossRefGoogle Scholar
  32. Gray E. R., J. M. T. Balmer (1998) Managing Corporate Image and Corporate Reputation, Long Range Planning 31(5):695–702CrossRefGoogle Scholar
  33. Grojean M. W., C. J. Resick, M. W. Dickson, D. B. Smith (2004) Leaders, Values, and Organizational Climate: Examining Leadership Strategies for Establishing an Organizational Climate Regarding Ethics, Journal of Business Ethics 55(3):223–241CrossRefGoogle Scholar
  34. Hadi A. S. (1992) Identifying Multiple Outliers in Multivariate Data, Journal of the Royal Statistical Society 54(3):761–771Google Scholar
  35. Hadi A. S. (1993) A Modification of a Method for the Detection of Outliers in Multivariate Samples, Journal of the Royal Statistical Society 56(2):393–396Google Scholar
  36. Hamilton L. (1992) Regression with Graphics: A Second Course in Applied Statistics. California, Duxbury PressGoogle Scholar
  37. Harrison J., E. R. Freeman (1999) Stakeholders, Social Responsibility, and Performance: Empirical Evidence and Theoretical Perspectives, Academy of Management Journal 42(5):479–485CrossRefGoogle Scholar
  38. Hatch M. J., M. Schultz (1997) Relations Between Organizational Culture, Identity and Image, European Journal of Marketing 31(5):356–365CrossRefGoogle Scholar
  39. Healy P. M., K. G. Palepu (2001) Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature, Journal of Accounting and Economics 31(1):405–440CrossRefGoogle Scholar
  40. Hill C., T. M. Jones (1992) Stakeholder-Agency Theory, Journal of Management Studies 29(2):131–154CrossRefGoogle Scholar
  41. Hillman A. J., G. D. Keim (2001) Shareholder Value, Stakeholder Management, and Social Issues: What’s the Bottom Line? Strategic Management Journal 22:125–139CrossRefGoogle Scholar
  42. Hosmer L. T. (1994) Strategic Planning as of Ethics Mattered, Strategic Management Journal 15(Special Issue):17–34Google Scholar
  43. Hummels H., D. Timme (2004) Investors in Need of Social, Ethical, and Environmental Information, Journal of Business Ethics 52(1):73–84CrossRefGoogle Scholar
  44. Jensen M. C. (2001) Value Maximization, Stakeholder Theory, and the Corporate Objective Function, Journal of Applied Corporate Finance 14(3):8–21CrossRefGoogle Scholar
  45. Jones T. M. (1995) Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics, Academy of Management Review 20(2):404–437CrossRefGoogle Scholar
  46. Jones T. M., A. C. Wicks (1999) Convergent Stakeholder Theory, Academy of Management Review 24(2):206–221CrossRefGoogle Scholar
  47. Leuthesser L., C. Kohli (1997) Corporate Identity: The Role of Mission Statements, Business Horizons 40(3):56–66CrossRefGoogle Scholar
  48. Logsdon J. M., K. Yuthas (1997) Corporate Social Performance, Stakeholder Orientation, and Organizational Moral Development, Journal of Business Ethics 16:1213–1226CrossRefGoogle Scholar
  49. Lorraine N. H., D. J. Collison, D. M. Power (2004) An Analysis of the Stock Market Impact of Environmental Performance Information, Accounting Forum 28(1):7–27CrossRefGoogle Scholar
  50. Margolis J. D., J. P. Walsh (2003) Misery Loves Companies: Rethinking Social Initiatives by Business, Administrative Science Quarterly 48(2):268–304CrossRefGoogle Scholar
  51. Markwick N., C. Fill (1997) Towards a Framework for Managing Corporate Identity, European Journal of Marketing 31(5/6):396–409CrossRefGoogle Scholar
  52. McWilliams A., D. Siegel (2000) Corporate Social Responsibility and Financial Performance: Correlation or Misspecification? Strategic Management Journal 21(5):603–609CrossRefGoogle Scholar
  53. Melewar T. C., E. Jenkins (2002) Defining the Corporate Identity Construct, Corporate Reputation Review 5(1):76–90CrossRefGoogle Scholar
  54. Mitchell R. K., B. R. Agle, D. J. Wood (1997) Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts, Academy of Management Review 22(4):853–886CrossRefGoogle Scholar
  55. Moskowitz M. (1975) Profiles in Corporate Responsibility: The Ten Worst, The Ten Best, Business and Society Review 13:8–42Google Scholar
  56. Orlitzky M., F. L. Schmidt, S. L. Rynes (2003) Corporate Social and Financial Performance: A Meta-Analysis, Organization Studies 24(3):403–441CrossRefGoogle Scholar
  57. Pfeffer J., G. R. Salancik (1978) The External Control of Organizations: A Resource Dependence Perspective. New York, Harrper & RowGoogle Scholar
  58. Philips R. A. (1997) Stakeholder Theory and the Principle of Fairness, Business Ethics Quarterly 7:51–66CrossRefGoogle Scholar
  59. Phillips R. A., J. Reichart (2000) The Environment as a Stakeholder? A Fairness-Based Approach, Journal of Business Ethics 23(2):185–197CrossRefGoogle Scholar
  60. Ponemon L., C. Michaelson (2000) Ethics at the Core, Perspectives - PricewaterhouseCoopers 2:4–9Google Scholar
  61. Post J. E., L. E. Preston, S. Sachs (2002) Managing the Extended Enterprise: The New Stakeholder View, California Management Review 45(1):6–28Google Scholar
  62. Rawwas M. Y. A., Z. Swaidan, M. Oyman (2005) Consumer Ethics: A Cross-Cultural Study of the Ethical Beliefs of Turkish and American Consumers, Journal of Business Ethics 57(2):183–195CrossRefGoogle Scholar
  63. Roberts P. W., G. R. Dowling (2002) Corporate Reputation and Sustained Superior Financial Performance, Strategic Management Journal 23:1077–1093CrossRefGoogle Scholar
  64. Roberts R. (1992) Determinants of Corporate Social Responsibility Disclosure, Accounting, Organizations and Society 17(6):595–612CrossRefGoogle Scholar
  65. Rockness H., J. Rockness (2005) Legislated Ethics: From Enron to Sarbanes-Oxley, the Impact on Corporate America, Journal of Business Ethics 57(1):31–54CrossRefGoogle Scholar
  66. Schwab B. (1996) A Note on Ethics and Strategy: Do Good Ethics Always Make for Good Business? Strategic Management Journal 17:499–500CrossRefGoogle Scholar
  67. Scott S. G., V. R. Lane (2000) A Stakeholder Approach to Organizational Identity, Academy of Management Review 25(1):43–62CrossRefGoogle Scholar
  68. Sethi S. P. (2005) Investing in Socially Responsible Companies is a Must for Public Pension Funds – Because there is No Better Alternative, Journal of Business Ethics 56(2):99–129CrossRefGoogle Scholar
  69. Sharfman M. (1996) The Construct Validity of the Kinder, Lydenberg & Domini Social Performance Rating Data, Journal of Business Ethics 15:287–296CrossRefGoogle Scholar
  70. Stevens J. M., H. K. Steensma, D. A. Harrison, P. L. Cochran (2005) Symbolic or Substantive Document? The Influence of Ethics Codes on Financial Executives’ Decisions, Strategic Management Journal 26:181–195CrossRefGoogle Scholar
  71. Strong K. C., R. C. Ringer, S. A. Taylor (2001) The Ruled of Stakeholder Satisfaction (Timeliness, Honesty, Empathy) Journal of Business Ethics 32(3):219–230CrossRefGoogle Scholar
  72. Stuart H. (2002) Employee Identification with the Corporate Identity, International Studies of Management & Organization, 32(3):28–44Google Scholar
  73. Tannous G. (1997) Capital Budgeting for Advertising Expenditures: A Contingent Claims Approach, Review of Quantitative Finance and Accounting 8:109–128CrossRefGoogle Scholar
  74. Treviño L. K., G. R. Weaver (1999) The Stakeholder Research Tradition: Convergent Theorists-Not Convergent Theory, Academy of Management Review 24(2):222–227CrossRefGoogle Scholar
  75. van Rekom J. (1997) Deriving an Operational Measure of Corporate Identity, European Journal of Marketing 31(5/6):410CrossRefGoogle Scholar
  76. van Riel C. B. M. (1995) Principles of Corporate Communication New York, Prentice HallGoogle Scholar
  77. van Riel C. B. M., J. M. T. Balmer (1997) Corporate Identity: The Concept, Its Measurement and Management, European Journal of Marketing 31(5/6):340–355CrossRefGoogle Scholar
  78. Waddock S. A., S. B. Graves (1997) The Corporate Social Performance-Financial Performance Link, Strategic Management Journal 18(4):303–319CrossRefGoogle Scholar
  79. Walsh J. P., K. Webber, J. D. Margolis (2003) Social Issues and Management: Our Lost Cause Found, Journal of Management 29(6):859–881CrossRefGoogle Scholar
  80. Wartick S. L., P. L. Cochran (1985) The Evaluation of the Corporate Social Performance Model, Academy of Management Review 10(4):758–769CrossRefGoogle Scholar
  81. Weaver G. R., L. K. Treviño, P. L. Cochran (1999) Integrated and Decoupled Corporate Social Performance: Management Commitments, External Pressures, and Corporate Ethics Practices, Academy of Management Journal 42(5):539–552CrossRefGoogle Scholar
  82. Wicks A. C., D. R. Gilbert Jr., E. R. Freeman (1994) A Feminist Reinterpretation of the Stakeholder Concept, Business Ethics Quarterly 4:475–498CrossRefGoogle Scholar
  83. Wood D. J. (1991) Corporate Social Performance Revisited, Academy of Management Review 16(4):691–718CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2007

Authors and Affiliations

  • Pascual Berrone
    • 1
  • Jordi Surroca
    • 1
  • Josep A. Tribó
    • 1
  1. 1.Department of Business AdministrationUniversidad Carlos III de MadridGetafe, MadridSpain

Personalised recommendations