Today I am highlighting a very interesting economics article exploring the relationship between corporate social performance and corporate financial performance.  

Scholars have been searching for a link between corporate social performance (CSP) and corporate financial performance (CFP) for thirty-five years. If only doing good could be connected to doing well, then companies might be persuaded to act more conscientiously, whether in cleaning up their own questionable conduct (Campbell, 2006) or in redressing societal ills (Porter & Kramer, 2006). A positive link between social and financial performance would legitimize corporate social performance on economic grounds, grounds that matter so much these days (Useem, 1996). It would license companies to pursue the good—even incurring additional costs—in order to enhance their bottom line and at the same time contribute more broadly to the well-being of society.

In DOES IT PAY TO BE GOOD?, three economists (Joshua Margolis,  HIllary Anger Elfenbein, and James P. Walsh) perform a meta analysis of 251 effects in over 200 manuscripts to examine the relationship between CSP and CFP.  They find a small positive effect. Most importantly, the articles engages in a rich conversation (and critique) of empirical studies in this area and suggests parameters for future research.  

This paper is accessible for non-economists and provides a very interesting discussion on the links between doing well and doing good.

-Anne Tucker

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Photo of Anne Tucker Anne Tucker

Anne Tucker teaches and researches contracts, corporations, securities regulations, and investment funds.

Tucker’s research focuses on three areas of business law. The first is on the regulation and administration of funds (both public and private funds) and how pooled investments can achieve significant…

Anne Tucker teaches and researches contracts, corporations, securities regulations, and investment funds.

Tucker’s research focuses on three areas of business law. The first is on the regulation and administration of funds (both public and private funds) and how pooled investments can achieve significant personal and social ends, such as retirement security and private funding for social entrepreneurship. Second, she focuses on impact investing and contract terms that reinforce impact objectives alongside financial returns. Third, she studies corporate governance, including the role of institutional investors as shareholders. Read More