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Driven to Be Good: A Stakeholder Theory Perspective on the Drivers of Corporate Social Performance

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Abstract

Despite growing evidence of the benefits to a firm of improving corporate social performance (CSP), many firms vary significantly in terms of their CSP activities. This research investigates how the characteristics of the stakeholder landscape influence a firm’s CSP breadth. Using stakeholder theory, we specifically propose that several factors increase the salience and impact of stakeholders’ demands on the firm and that, in response to these factors, a firm’s CSP will have greater breadth. A firm’s CSP breadth is operationalized as the number of different sub-domains of CSR for which a firm has taken positive actions and is captured using a unique dataset from Kinder, Lydenburg, and Domini (KLD). This data set includes positive and negative firm actions across more than 35 different dimensions of socially responsible behavior. Findings based on a longitudinal, multi-industry sample of 447 US firms during the period from 2000 to 2007 demonstrate that firms which: (1) have greater sensitivity to stakeholder needs as a result of the firm’s strategic emphasis on marketing and/or value creation, (2) face greater diversity of stakeholder demands, and (3) encounter a greater degree of scrutiny or risk from stakeholder action have a greater breadth of CSP in response to the stakeholder landscape that they face.

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Notes

  1. For the purpose of the present study, we define CSR as defined in Hopkins (2007): “CSR consists of voluntary initiatives taken by companies over and above their legal or social obligations that integrate societal and environmental concerns into their business operations and interactions with their stakeholders.” Previous research has argued that it is the visible aspects and outcomes of a CSR program on which a company’s motives will be judged, its use of responsive processes assessed, and its overall performance determined by stakeholders (Wood 1991). CSP is an outcome measure of the visible aspects of the implementation of policies and programs intended to reach the overarching goal of CSR. Therefore, we examine the actual behavior of firms, and the remainder of the paper will focus on and refer to a firm’s CSP.

  2. Despite the significant conceptual overlap between the two measures, our “Methodology” section will show that formal tests for multicollinearity indicate that these measures are significantly non-overlapping, and each measure is tested separately in our estimated models.

  3. Further analysis shows that removing outliers does not significantly change the averages demonstrated in Fig. 2.

  4. The only correlation that exceeds 0.4 is between SG&A and Advertising spending, which is acceptable and expected given that SG&A includes Advertising spending in addition to several other types of marketing spending including marketing research, sales effort, trade promotions and related activities (Dutta et al. 1999).

  5. We thank an anonymous reviewer for this comment.

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Authors and Affiliations

  1. School of Business, Queen’s University, Goodes Hall, 143 Union St., Kingston, ON, K7L 3N6, Canada

    Jacob Brower

  2. McCombs School of Business, University of Texas, Austin, TX, 78712, USA

    Vijay Mahajan

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  1. Jacob Brower
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Correspondence to Jacob Brower.

Appendix

Appendix

Dimensions and sub-domains of positive CSP included in KLD Stats database:

Community

  • Limited Compensation

  • Ownership Strength

  • Transparency Strength

  • Political Accountability

  • Public Policy Strength

Corporate Governance

  • Charitable Giving

  • Innovative Giving

  • Support for Housing

  • Support for Education

  • Non-US Charitable Giving

  • Volunteer Programs

Diversity

  • CEO

  • Promotion

  • Board of Directors

  • Work-Life Benefits

  • Women and Minority Contracting

  • Employment of Disabled

  • Gay and Lesbian Policies

Employment

  • Union Relations

  • No-Layoff Policy

  • Cash Profit Sharing

  • Employee Involvement

  • Retirement Benefits

  • Health and Safety

Environmental

  • Beneficial Products and Services

  • Pollution Prevention

  • Recycling

  • Clean Energy

  • Property, Plant, and Equipment

  • Management Systems

Humanitarian

  • Indigenous Peoples

  • Labor Rights

  • Human Rights

Product

  • Quality

  • R&D/Innovation

  • Benefits to Economically Disadvantaged

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Brower, J., Mahajan, V. Driven to Be Good: A Stakeholder Theory Perspective on the Drivers of Corporate Social Performance. J Bus Ethics 117, 313–331 (2013). https://doi.org/10.1007/s10551-012-1523-z

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