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Managerial Practices and Corporate Social Responsibility

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Abstract

A unique dataset is exploited to provide insight into the impact of management quality practices (MQPs) on corporate social responsibility (CSR) for a sample of US manufacturing firms. Our results suggest that MQPs are positively and significantly related to a firm’s CSR rating. This confirms that intangible assets affect corporate outcomes. We also show that superior MQPs matter more in explaining the CSR dimensions that are related directly to the firm’s primary stakeholders.

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Notes

  1. Only 18 of the 127 studies from 1972 to 2002 reviewed by Margolis and Walsh (2003) treated CSR as the dependent variable (Campbell 2007). For the purpose of this study, and in line with a steadily accumulating body of CSR literature, we use KLD CSR scores to measure a firm’s CSR rating.

  2. A mounting body of evidence suggests that managers’ fixed effects are linked to variability in material accounting manipulations (Feng et al. 2010); tax avoidance (Dyreng et al. 2010) and voluntary disclosures (Bamber et al. 2010); and investment and organizational practices of firms (Bertrand and Schoar 2003). Demerjian et al. (2012, p. 3) note the difficulty in implementing the fixed effect approach because it does not offer a “generalizable ordinal ranking of quality” and requires that a firm experiences at least one manager turnover during the sample period.

  3. The alternative (orthodox) view of CSR does not support such a relationship. For instance, one can build on the posturing hypothesis of Waddock and Graves (1997a) and argue that CSR is conducted for the sake of “appearing” socially responsible. Therefore, CSR investment will increase costs, which will have an adverse effect on stakeholders’ value. Even if CSR is not, per se, harmful to the firm and its shareholders, the lack of an accurate measure of a firm’s social activities (Chatterji et al. 2009) or the inability of investors to accurately assess, interpret, and price a firm’s CSR expenditures may decrease their potential beneficial effects.

  4. For instance, in order to avoid potential bias in managerial responses, Bloom and Van Reenen (2007) used a double-blind survey tool, where managers did not know the interviewers and interviewers did not know the performance of the firm being surveyed. In addition, they validated their survey by resurveying firms and interviewing different managers in different plants using different interviewers in the same firms.

  5. In a separate unreported set of tests, we reproduce all our analysis using contemporaneous CSR (i.e., measured the same year as the right-hand-side variables of Eq. 2). All our results remain substantially unchanged, lending further support to our main finding that superior managerial practices are associated with increased CSR.

  6. IV regression results remain largely unchanged when we control for the additional control variables.

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Acknowledgments

We acknowledge with much appreciation the comments and suggestions by Steven N. Kaplan, Gary Monroe (Section Editor), Sandra Waddock and an anonymous referee. We also thank Sadok El Ghoul, Brian Meagher, Rahaman Mohammad, and participants at Dalhousie University Mackay Finance Seminars and the NFA 2011 meetings for their helpful comments and suggestions. Najah Attig is particularly grateful to Nicholas Bloom and John Van Reenen for granting the right to use “management quality” survey data for this specific research project and for providing valuable comments. The generous financial support from Canada’s Social Sciences and Humanities Research Council is appreciated.

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  1. Saint Mary’s University, Halifax, NS, B3H 3C3, Canada

    Najah Attig

  2. Queen’s University, Kingston, ON, K7L 3N6, Canada

    Sean Cleary

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  1. Najah Attig
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  2. Sean Cleary
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Correspondence to Sean Cleary.

Appendix

Appendix

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Table 7 Bloom and Van Reenen’s (2007) Management Practice Dimensions
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Attig, N., Cleary, S. Managerial Practices and Corporate Social Responsibility. J Bus Ethics 131, 121–136 (2015). https://doi.org/10.1007/s10551-014-2273-x

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