This article examines how well the Kinder, Lydenberg, Domini Research & Analytics ratings measure past corporate social performance and predict future corporate social performance in Diversity and Governance categories. The results show that the KLD ratings effectively measure and predict social performance in both categories. The results also suggest that the KLD ratings may identify differences in the quality of management and firm which can affect future social performance and is not entirely explained by past social performance. The findings of (...) this study lend some support for empirical studies relying on the KLD ratings to operationalize corporate social performance. The findings suggest that users of the ratings need to have a clear understanding of what information they are seeking from the KLD ratings in order to maximize the utility of these ratings. (shrink)

With the blossoming of research on corporate social performance, the data produced by Kinder, Lydenberg, Domini have become the standard to measure firms’ social and stakeholder actions. However, to date, only a few studies have focused on examining the data directly, and have done so largely in terms of validating the concepts and methods in the data set’s construction. The present study seeks to complement these efforts by contributing knowledge about what the KLD data report on firms’ actions toward primary (...) and secondary stakeholders, and the dimensions of CSP that firms generally engage in, together or sequentially. With data on 3,073 firms over the period 2000-2010, results show that firms expend more resources on garnering strengths in primary stakeholder dimensions, although this trend is sharply deteriorating to the benefit of secondary stakeholders—notably the natural environment. Results also show that firms generally approach CSP with a mixed behavior, with strengths and concerns in the same dimensions, especially as it pertains to secondary stakeholders. These are the same dimensions in which firms show the longer, more intrinsic commitments, suggesting that secondary stakeholder strengths and concerns may be structural in nature. However, there is also evidence of relationships across dimensions, indicating that firms’ involvement in CSP can generate momentum. The rich implications of these findings are discussed. (shrink)

Though it was originally designed primarily for ethical investors, the KLD data base can be used by academics for both teaching and research purposes. This paper outlines several advantages of these academic uses of this data base and suggests several potential improvement areas for even wider academic usage.

Carroll (1991) encouraged researchers in Social Issues Management (SIM) to continue to measure Corporate Social Performance (CSP) from a variety of different perspectives utilizing a variety of different measures. However, Wolfe arid Aupperle (1991) (and other’s) have asserted that there is no, single best way to measure CSP and that multiple measures and perspectives help develop the field. Recently, Kinder, Lyndenberg and Domini & Co. (KLD - a social choice investment advisory firm) has made available their social performance database. The (...) purpose of this paper is to present a concurrent validity study comparing the KLD data to other measures of CSP. (shrink)

This article examines the concurrent validity of the Kinder, Lydenberg, Domini Research & Analytics corporate social performance measures. Because KLD changed its evaluation methods to richer approaches, a new look at the concurrent validity of the indicators is necessary. To do this new look, the authors examine the new “Binary” and “Continuous” versions of the KLD and compare them with previous versions of KLD. The results suggest that the continuous scores provide better measurement characteristics than do the binary version. Overall, (...) the new versions of the KLD data demonstrate concurrent validity with the original version. (shrink)

This study contributes to the work on board composition and firm corporate social responsibility by extending it to the environmental domain. It evaluates the relationship between boards of directors’ composition and environmental corporate social responsibility (ECSR) by integrating literatures on board composition, firm corporate social responsibility, and individual differences in attitudes toward and information about environmental issues. Using disclosed company data and the natural environment ratings data from Kinder Lydenberg Domini (KLD) Inc. for 78 Fortune 1000 companies, the study finds (...) that a higher proportion of outside board directors is associated with more favorable ECSR and higher KLD strengths scores. Firms with boards composed of three or more female directors received higher KLD strengths scores. And, boards whose directors average closer to 56 years in age and those with a higher proportion of Western European directors are more likely to implement environmental governance structures or processes. Our results also reinforce growing concerns around unidimensional KLD measures. (shrink)

While there are growing bodies of research examining both the differences between strongly and poorly socially performing firms, and the impact of firm leaders on other strategic outcomes, little has been done in examining the effect of firm leaders on corporate social performance (CSP). This study directly addresses this issue by using upper echelon theory, and the KLD Research Analytics CSP ratings, to show that observable CEO characteristics predict differences in CSP between firms, even when firm and industry characteristics are (...) controlled for. Using a sample of 650 public US firms I find that strong or exemplary CSP, as measured by the strengths categories of KLD's ratings, is positively related to the CEO having a bachelor's degree in humanities, having a breadth of career experience and being female. I find that KLD strength ratings are negatively related to the CEO having a bachelor's degree in economics and to their level of short-term compensation. Preliminary tests of causality support the assertion that these effects reflect CEO discretion rather than being an artifact of reverse causality. Significant relationships between the CEO characteristics and poor social performance as measured by the concerns categories of KLD's ratings are not found. This suggests that CEOs have more discretion in influencing strong and exemplary social performance than in impacting poor CSP. Implications, particularly for economics education, are discussed. While there are many fruitful directions for future research, the benefits and challenges to conducting similar studies in other countries is focused upon to correspond to the global nature of this special issue. (shrink)

Firms are spending billions annually in the name of corporate social responsibility (CSR). Whilst markets are increasingly willing to reward good and responsible firms, they lack the instruments to measure corporate social performance (CSP). To convince investors and other stakeholders, firms invest heavily in building a reputation for good corporate behaviour. This article argues that reputations for CSP are often unrepresentative of true CSP and investigates how differences in 'perceived' and 'actual' – as measured by the Fortune and KLD databases, (...) respectively – can partly be explained by firm characteristics. Amongst other things, it finds that overrated firms are more likely to be relatively big, profitable, operating in non-polluting but competitive industries and with no history of wrong doings to their primary stakeholders. They will also typically spend a lot of effort satisfying the claims of their secondary stakeholders. Above all, the results emphasise the need for researchers to recognise that the databases measure different phenomenon and are not interchangeable. (shrink)

This study investigates the financial effects of additions to and deletions from the most well-known social stock index: the MSCI KLD 400. Our study makes use of the unique setting that index reconstitution provides and allows us to bypass possible issues of endogeneity that commonly plague empirical studies of the link between corporate social and financial performance. By examining not only short-term returns but also trading activity, earnings per share, and long-term performance of stocks that are involved in these events, (...) we bring forward evidence of a ‘social index effect’ where unethical transgressions are penalized more heavily than responsibility is rewarded. We find that the addition of a stock to the index does not lead to material changes in its market price, whereas deletions are accompanied by negative cumulative abnormal returns. Trading volumes for deleted stocks are significantly increased on the event date, while the operational performances of the respective firms deteriorate after their deletion from the social index. (shrink)

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. (shrink)

In this article, we explore the relationship between corporate social responsibility (CSR) and earnings management (EM). Our CSR index, using KLD data, incorporates information from the following issue areas: the community, corporate governance, diversity, the product, employee relations, the environment, and human rights. Results show that more socially responsible firms have higher quality accruals and less activity-based EM, both of which impact financial reporting quality.

This article extends earlier research concerning the relationship between corporate social performance and corporate financial performance, with particular emphasis on methodological inconsistencies. Research in this area is extended in three critical areas. First, it focuses on a particular industry, the chemical industry. Second, it uses multiple sources of data-two that are perceptual based (KLD Index and Fortune reputation survey), and two that are performance based (TRI database and corporate philanthropy) in order to triangulate toward assessing corporate social performance. Third, it (...) uses the five most commonly applied accounting measures in the corporate social performance and corporate financial performance (CSP/cfp) literature to assess corporate financial performance. The results indicate that the a priori use of measures may actually predetermine the CSP/cfp relationship outcome. Surprisingly, Fortune and KLD indices very closely track one another, whereas TRI and corporate philanthropy differentiate between high and low social performers and do not correlate to the firm's financial performance. (shrink)

Carroll (1991) encouraged researchers in Social Issues Management (SIM) to continue to measure Corporate Social Performance (CSP) from a variety of different perspectives utilizing a variety of different measures. In addition, Wolfe and Aupperle (1991) (and others) have asserted that there is no, single best way to measure CSP and that multiple measures and perspectives help develop the field. However, Pfeffer (1993) suggest that a lack of consistent measurement has constrained organization studies (and by implication, the field of social issues (...) management,) in its development as a field. It may be in the best interest of social issues management researchers to try to development a common body of measures and data. Recently, Kinder, Lydenberg and Domini & Co. (KLD — a social choice investment advisory firm) has made available their social performance database. The KLD data have potential to become a widely accepted set of CSP measures. The purpose of this paper is to present a construct validity study comparing the KLD data to other measures of CSP. (shrink)

This paper examines the relationship between CEO incentives and strong and weak corporate social performance. Using the KLD database we find that incentives have no significant relationship with strong social performance. Salary and long-term incentives have a positive association with weak social performance.

Grounded in stakeholder theory and a resource-based view of the firm, this longitudinal research demonstrates the evolution of corporate social responsibility (CSR) and firm reputation over time. Drawing on a 5-year sample of 285 major U.S. firms obtained from the KLD database and Fortune’s Most Admired Companies, we find that the proposed dynamic relationship predicts evolving stakeholder expectations to incite organizations to improve their social performance to earn reputational benefits. Contrary to the often labeled stickiness of reputation, we find a (...) “Red Queen” effect that supports reputation as a dynamic construct where the change in CSR does predict a change in corporate reputation. Similarly, we find that the change in reputation over time varies by industry, being most pronounced for manufacturing. From a practical perspective, this relationship across time may incite managers to create sustainable competitive advantage by continuously investing in doing good to reap the benefits of looking good and looking even better with time. (shrink)

This article aims at providing a framework to assess corporate social responsibility with international banks. Currently, it is mainly rating institutions like EIRIS and KLD that provide information about firms’ social conduct and performance. However, this is costly information and it is not clear how the rating institutions arrive at their conclusion. We develop a framework to assess the social responsibility of internationally operating banks. We apply this framework to more than 30 institutions and find significant differences among individual banks, (...) countries, and regions. Furthermore, it appears that social responsibility of these banks has significantly improved between 2000 and 2005. (shrink)

This article reviews empirical research of corporate social performance using Kinder, Lydenberg, Domini social ratings data through 2011. The review synthesizes 100 empirical studies, noting consistencies and inconsistencies among studies examining similar constructs. Notable consistencies were that, although accounting measures of financial performance were a positive outcome of CSP, the same was not often true of stock returns. Also, demographics of top management teams increased CSP strengths, but did not reduce concerns, whereas organizational decentralization reduced CSP concerns. Notable inconsistencies were (...) that CEO demographics were not as often related to CSP as were TMT demographics, indicating that managerial discretion may be an important mitigating factor shaping managerial effects on CSP. Also, although CSP for some organizations seemed influenced by institutional pressures, other organizations appeared to be less influenced, perhaps suggesting that some organizations are more able than others to resist institutional pressures. Future research should attempt to probe observed consistencies and inconsistencies, and to test the boundaries of observed relationships, toward a disciplined program of middle-range theory development. (shrink)

Corporate Social Responsibility (CSR) is a tortured concept. In this paper, we reframe CSR into a number of discrete Corporate Social Responsibilities (CSR’s), each of which can have a positive or negative social impact, and each of which has an endogenous managerially driven component, and an exogenous stakeholder driven component. Using an industry-level sample drawn from the KLD data base, we test the impact of hypothesized drivers of CSR on various CSR’s.

Planetary degradation continues despite widely publicized eco-friendly behaviors of individual firms, creating a big disconnect. Drawing upon paradox theory, we examine the prevalence of both corporate compensatory action and environmental inaction after a firm commits environmental misdeeds. We argue that both limited compensatory actions and persistent inaction pose significant moral, economic, and system-level ecological implications. Next, based on insights from crisis management literature, we propose a multi-stage, sequential model to predict both the likelihood that a firm takes eco-friendly action after (...) misdeeds and, if it does, the extent of these actions. In the first stage, we hypothesize that firm size, a proxy for visibility, positively moderates the likelihood of taking eco-friendly action to redirect negative attention after misdeeds. In the second stage, we hypothesize that smaller, more nimble firms have an implementation advantage, leading to a higher likelihood of more action after misdeeds. Based on 12,012 observations from the KLD sample of US-based firms between 2013 and 2019, inclusive, we find support for the big disconnect, since we find that inaction is the most common response after misdeeds. We also find that larger firms are more likely to have eco-friendly behaviors. And, for those firms who take action, smaller firms undertake more compensatory actions after environmental misdeeds. Persistent inaction and dispersed, small-scale compensatory actions can be problematic. Smaller firms may expend unnecessary resources and not get credit for disparate, eco-friendly activities. At the same time, larger firms may get more credit than deserved despite relatively limited actions. Collectively, inaction and dispersed compensatory action may not have sufficient impact to alter ecological degradation with subsequent intergenerational, irreversible harms. Nuanced practical and scholarly implications that curtail limited action while encouraging small firm experimentation are explored. (shrink)

Different proprietary databases have been used extensively in research to assess the environmental performance and environmental risk of companies. This study explores the convergent validity of the environmental ratings of MSCI ESG STATS, Thomson Reuters ASSET4 and Global Engagement Services. The study shows that the ratings have common dimensions, but on aggregate, they do not converge. On the environmental opportunity side, KLD environmental strengths, and ASSET4 and GES environmental performance metrics correlate highly and provide convergent scores for US companies from (...) 2003–2011. On the environmental risk side, KLD environmental concerns converge with the GES environmental industry risk and company emissions from the ASSET4 database. Further analysis confirms that industry-related risks are drivers of company-specific environmental performance. (shrink)

Corporate social responsibility (CSR) is a tortured concept. A number of alternative definitions of the construct exist at the theoretical level, and much debate surrounds the meaning (and its related implications for practice) of the term. Empirically, CSR research reaches few remarkable conclusions. In this article, the authors reconceptualize CSR into a number of discrete corporate social responsibilities (CSRs), each of which can have a positive or negative social impact, and each of which has an endogenous managerially driven component and (...) an exogenous stakeholder-driven component. Using an industry-level sample drawn from the KLD database, the authors test the impact of hypothesized drivers of CSR on various CSRs. (shrink)

Research examining firm and industry effects on performance has primarily focused on the financial aspects of firm performance. Corporate social performance is a major aspect of firm performance that has been under-examined empirically in the literature to date. Adding to the fundamental debate regarding firm versus industry effects on performance, this study uses data drawn from the Kinder, Lydenberg and Domini Co. database to examine the degree to which CSP is related to firm, industry, and temporal factors. The results of (...) these analyses suggest that CSP tends to change in a linear manner over time; however, the slope of this line varies across firms and industries. These findings are supported by several robustness checks accounting for autocorrelation, alternative measures of industry, different samples commonly used when using KLD data to measure CSP, and alternative measures of CSP when using the KLD database. The authors also directly compare firm, industry, and temporal effects between CSP and financial performance. (shrink)

CEOs who participate in hunting and fishing benefit by appreciating natural environments and permanently consuming natural resources. We examine whether CEOs who hunt and fish make different environmental decisions and find that firms led by CEOs who obtain the most hunting and fishing licenses have lower environmental performance as measured by MSCI-KLD. This effect is strongest in the environmental category of climate change but also extends to pollution, waste, and the protection of natural capital. Furthermore, firms led by CEOs with (...) the most hunting and fishing licenses are significantly more likely to pay a regulatory settlement for an environmental regulatory infraction. (shrink)

This paper argues the case that tests of how investors value corporate social performance (CSP) based upon realised stock market returns are liable to be weak tests if markets are efficient and firms change CSP policies infrequently. We provide a theoretical explanation of why this will be the case using examples to illustrate. Subsequently, we set out an alternative theoretical framework for the purposes of investigating whether markets place a positive, or a negative, valuation on CSP, and show why this (...) is superior to tests based upon Tobin’s Q. Using US KLD data, we demonstrate that, as theorised, markets place a positive value on CSP that is not detected by conventional returns-based tests. Our conclusion is that researchers who are interested in the question of whether engagement with a corporate social responsibility agenda is a value-enhancing activity for a company (as argued by some stakeholder theorists) or value destructive (as argued by Friedman, The social responsibility of business is to increase its profits, The New York Times Magazine, 1970), need to look beyond returns-based tests to answer the research question posed. (shrink)

Previous studies have proposed a virtuous circle between corporate social performance (CSP) and corporate financial performance (CFP). However, a key challenge researchers face when empirically examining this virtuous circle is endogeneity. In this paper, we apply a well-developed method—dynamic panel data (DPD) estimation—to account for endogeneity and conduct two studies to reexamine the causal relationship between CSP and CFP. Study 1 relies on KLD ratings from 1997 to 2012 as the measure of CSP. According to the results of Study 1, (...) although CFP measured as ROE may have a causal impact on CSP, it is doubtful whether there is a causal influence of CSP on CFP. Study 2 relies on the sustainability scores provided by Sustainalytics from 2009 to 2018 as the measure of CSP. Study 2 reports that CSP does not causally influence CFP and that CFP does not have a causal impact on CSP. Together, Study 1 and Study 2, using different measures for CSP, suggest that a virtuous circle between CSP and CFP may not exist. Our study suggests that doing good may not necessarily lead to doing well and that doing well may not naturally result in doing good. Thus, our study implies that future studies should seriously consider the causal mechanisms through which CSP may influence or may be influenced by CFP. Our paper also discusses the implications for CSP research and for management and organization research. The limitations of applying DPD estimation to empirically examine the causal relationship between CSP and CFP are also discussed. (shrink)

Although the concept of corporate social responsibility is fundamentally multidimensional, most studies use composite scores to assess corporate social performance. How relevant are such composite scores? How the CSR dimensions are weighted? Should the weighting scheme be the same across sectors? This article proposes an original weighting scheme of CSR strengths and concerns, at the sector level, which is proportional to media and nongovernmental organizations scrutiny. The authors show that previous CSP assessments underweight environmental and corporate governance concerns. Moreover, findings (...) suggest that firms that are exposed to the closest scrutiny are usually criticized on one single dimension: for instance, banks for bad corporate governance, and basic-resource firms for environmental damage. Composite scores based on equal weights hence misrepresent CSP and the difference in CSR between sectors. (shrink)

In this article we examine the association between corporate social responsibility (CSR) and firm value. This line of research is important since firms continue to invest in CSR even though past studies reveal a limited linkage between financial value and CSR. However, the business case for CSR or “doing good while making a profit,” appears to be advancing within the business ethics literature as a preferred conception of CSR. We conjecture that the greater unification and refinement of both profit maximization (...) and stakeholder interests through corporate acts, not statements alone, will sustain the financial value of CSR in a less regulated global business environment. We study the triangle of what companies say, what companies do, and firm financial performance. We analyze Fortune 250 firms and find a positive association between what companies do based on KLD Research and Analytics, Inc. (KLD) ratings, and what companies state about ethics in their CSR statements. We then employ regression analysis and find that companies’ socially responsible acts are positively associated with overall firm value and financial performance. Yet we do not find a statistically significant association between what companies say regarding ethics in their CSR statements and their financial outcomes. These results suggest that firm value and financial performance is associated with what companies do and not what they say. Our results seem to be driven by multinational corporations (MNCs) and not by non‐MNCs. This is possibly because MNCs generally operate in a less regulated global business environment that often necessitates strong ethical corporate leadership to further stakeholder interests. Overall, these results help reconcile corporate and stakeholder objectives since evidence of a link between financial performance and doing good sustains global CSR. (shrink)

This study investigates corporate social responsibility of sinful firms, which refer to ones that are operating in controversial industries, including the production and distribution of alcohol, tobacco, gambling, adult entertainment, firearm, military, and nuclear power. We attempt to answer two questions in this study: Do these sinful firms actively advertise their CSR engagements compared to non-sinful firms? And do their advertising efforts really yield increased financial performance? Positing that advertising not only can make sinful firms’ good deeds visible, but also (...) can highlight the contradiction between these firms’ stigma and their prosocial activities, we claim that sinful firms are likely to advertise their CSR engagement to overcome their stigmatized firm image, but these advertising activities will make the firms’ performance vulnerable by inducing skepticism from stakeholders. Using KLD database in conjunction with COMPUSTAT and Center for Research in Security Prices from 1991 to 2010, where 337 firms are involved in the controversial sinful industries, namely tobacco, alcohol, gaming, firearms, military, and nuclear power, we examine the effect of advertising spending of sinful firms’ CSR engagement on performance vulnerability, which is instantiated with idiosyncratic risk. The empirical results indicate that sinful firms increase their advertising expenditure when they engage in CSR programs, but these efforts for advertising CSR tend to increase idiosyncratic risk. This finding indicates that even though sinful firms can benefit from engaging in socially responsible initiatives, advertising their CSR efforts may backfire. (shrink)

The Domini Social Index (DSI) is an index of 400 socially responsible companies as defined and measured by Kinder, Lydenberg, Domini, Inc. (KLD), a consulting firm. Because its composition mirrors Standard & Poor's 500 (S&P), comparison of the financial performance of the two indices can reveal the impact on financial performance of imposing social criteria as well as financial criteria for the selection of stocks in a portfolio, enabling us to come farther toward an answer to this question: What is (...) the relationship between corporate social performance and financial performance? Comparing the relative perofrmance of the DSI and the S&P from May 1, 1990 through January 31, 1996 demonstrates that for that period the total return for the DSI was 142.94% versus 128.12% for the S&P, indicating that financial performance is not necessarily adversely affected by social screens. (shrink)

Using a sample of US stocks over the period 1991–2019, we test whether stocks with high exposure to a social index exhibit high returns. Using a univariate analysis, our in‐sample results show that stocks with high sensitivities to the MSCI KLD 400 Social Index underperform stocks with low sensitivities by an annual risk‐adjusted performance of 7.02%. The negative premium is also larger in the post‐crisis period of 2007–2019 and is equal to 10.25%. The out‐of‐sample results offer, however, only weak evidence (...) of such a finding, with a risk‐adjusted performance difference of merely −0.84% over the full sample period and no significant differences between the pre‐crisis and post‐crisis periods. In the multivariate regression, we find evidence of a negative relationship between exposure to the social index and stock performance. Moreover, we find that stocks with high exposure to the social index display a low corporate social responsibility score, a high Tobin’s Q, high long‐term debt, a large size, high total risk, a high market beta, a high SMB coefficient, a low HML coefficient, and a small MOM coefficient. (shrink)

This study examines whether and how female board directors may affect corporate social performance (CSP) by drawing on social role theory and feminist ethics literature. The empirical analysis, based on a sample of 126 firms drawn from the S&P500 group of companies over a 5-year period, suggests that board gender diversity (BGD) significantly affects CSP. However, this impact depends on the social performance metric under investigation. In particular, more gender diverse boards exert stronger influence on CSP metrics focusing on ‘negative’ (...) business practices, such as the ‘concerns’ dimension of the Kinder Lydenberg Domini, Inc. (KLD) ratings. This is because such CSP ratings have the potential to induce higher levels of ‘empathic caring’, which strongly appeals to female directors. Hence, this study reveals further hidden connections in the BGD–CSP link which have important implications for managers, nongovernmental organisations and socially responsible investors. (shrink)

This research empically examines the relationship between institutional investors, firm governance devices, and specific dimensions of corporate social performance using the KLD database. Results indicate the importance of institutional investor type as well as specific dimensions of CSP. Board composition and top management team equity are also related to CSP.

This paper extends earlier research concerning the relationship between corporate social performance and corporate financial performance in three critical areas. First, it focuses on a particular industry, the chemical industry. Second, it uses multiple sources of data (KLD index, TRI database, and Fortune reputation survey) in order to triangulate towards assessing corporate social performance. Third, it uses the five mostly commonly applied accounting measures in the CSP/CFP literature (logarithm of total assets, ROA, ROE, ROS-5 year, and asset age) to assess (...) corporate financial performance. The results indicate that the a priori use of certain measures may pre-determine the CSP/CFP outcome. Fortune and KLD indices very closely track the financial performance measures while the TRI database differentiates between high and low social performers and does not correlate to the firm’s financial performance. (shrink)

Although measurement is central to knowledge production, little is known about the process by which a dataset becomes accepted by academics as an appropriate way of measuring a phenomenon. Relying on actor-network theory and prior studies of the construction of organizational knowledge, and using the Kinder Lydenberg and Domini (KLD) database as a case, we analyze the activities that enabled the adoption of this dataset. Informed by a systematic content analysis of 573 articles referring to KLD and interviews with KLD (...) experts, we develop a process model that explains how datasets become accepted in academia and linked to theoretical concepts. In making visible the practical, symbolic and conceptual work that underlie a dataset adoption in academia, we show how academics can potentially be influenced by practitioners through metrics. Our findings also highlight the importance of reflexivity and mindfulness in the use of datasets. (shrink)

Researchers are seeking a measure of corporate social performance (CSP) that is consistent, valid, and reliable. In the meantime, they use whatever measure they can that provides them with a dependent variable(s) that is/are readily available, has been previously used, and/or best fits their data. The purpose of this study is to help researchers understand how various CSP measures relate by replicating the correlation portion of Sharfman's KLD construct validity study (1993) and further correlating the KLD scores with the Aupperle-derived (...) method of CSR and CSP, the Fortune measure commonly used to represent CSP, and corporate self-ratings. (shrink)

Corporate social responsibility (CSR) empirical scholarship overwhelmingly relies on a few archival datasets to examine firms’ action : strengths, concerns, and controversies. Yet persistently overlooked are salient issues with no current corporate action, represented by zeroes. These zeroes, in Morgan Stanley Capital International/Kinder, Lydenberg, Domini (MSCI/KLD) data, are not missing data. Rather, zeroes signify a lack of observable action on salient issues (which we term, inaction ). Persistently ignoring zeroes, we argue, distorts empirical findings and masks corporate inaction. When aggregated (...) across companies, overlooked zeroes can legitimize firms’ failure to address salient social or environmental issues. We discuss the importance of scrutinizing zeroes, explain how scholars inadvertently ignore them, explore implications, and provide alternative modeling choices. Our goal is to highlight conceptual and methodological blind spots that may meaningfully affect environmental, social and governance (ESG) research. We conclude by exploring how theoretical attention to these potentially information-rich zeroes can illuminate corporate behavior, including inaction on salient ESG issues. (shrink)

This paper examines the controversial governance mechanism of classified boards. Classified board advocates believe that multiple year terms give directors a longer-term horizon. Shareholder activists push for declassifications of boards because they argue that agency problems are likely to arise. In a longitudinal study of six years of KLD, RiskMetrics and Compustat data, we test the influence of classified boards on social performance dimensions. We find that classified boards are negatively associated with social performance strengths in the areas of community (...) and diversity, indicating that they are not proactive in these areas. However, classified boards are negatively associated with social performance concerns on five out of six dimensions, providing evidence that while these boards are not proactive in stakeholder management, neither are they harmful nor neglectful towards stakeholders. The overall findings suggest that classified boards may be associated with a stakeholder management philosophy of “do no harm.”. (shrink)

Anecdotal evidence seems to suggest that firms are responding differently to the mounting concerns over environmental degradation and climate change. While a few studies at individual firm level do exist, relatively little is known about the longitudinal development of corporate environmental strategy at the population level of firms. Employing KLD data we explore the evolution of environmental strategy among a sample of S&P500 corporations over the period 1997 to 2006. We theoretically ground our study in Burgelman’s (1991) autonomous and induced (...) perspectives of strategy-making. Our findings suggest widespread inertia among firms to adjust to the changing socio-institutional environment. (shrink)

We explore the Maximum Sensitivity method (MaxSen) of selecting priors for Bayesian inference in the face of severe lack of evidence (Konek, 2013). MaxSen minimizes the need to rely on the epistemic luck of true parameter values falling closely to their prior estimate.We explore the impact of the choice of the scoring method on the recommendations made by MaxSen. It turns out that if we use Kullback-Leibler Divergence (KLD) as a distance measure, the recommendations are the same as that of (...) MaxEnt. We estimate how quickly the recommended prior distribution concentration increases with the planned sample size. (shrink)

This is an exploratory study of corporate social performance in firms with family members in executive, governance, or strong ownership positions. Family firmsdominate the economy in most countries, including the United States, and families are thought to be more concerned with personal wealth creation and risk avoidance than social performance. Although such firms have been shown to have superior financial performance, I found no evidence of superior (or inferior) social performance among family firms in the S&P 500. In a departure (...) from the methodological norm in business and society, I used KLD data as dependent variables instead of independent variables. I was able to predict KLD scores from firm size, industry, and strategy variables, but family firm status rarely played a role. (shrink)

Previous research provides mixed results on the relationship between corporate environmental performance and the level of voluntary environmental disclosure. We revisit this relation by testing competing predictions from defensive and accommodative approaches to voluntary disclosure with regard to climate change. In particular, we add to the prior literature by determining the extent to which environmental performance and company media visibility interact to prompt voluntary climate change disclosure. Using ordinal regression and Ceres, KLD, and Trucost ratings of S& P 500 companies, (...) we find a positive relationship between environmental performance and voluntary climate change disclosure. We extend the literature on environmental strategies and disclosure by establishing that company visibility and issue (climate change) visibility interact with environmental performance to influence the level of voluntary climate change disclosure. (shrink)

The contribution of this work is a classification of corporate social action underlying the Social Ratings Data compiled by Kinder Lydenburg Domini Analytics, Inc. We compare extant typologies of corporate social action to the results of our exploratory factor analysis. Our findings indicate four distinct latent constructs that bear resemblance to concepts discussed in prior literature. Akey finding of our research is that positive and negative social action are both empirically and conceptually distinct constructs and should not be combined in (...) future research. Additionally, we recommend that some prior research results be reconsidered to determine whether these newly derived measures might clarify some previous findings. (shrink)

This study provides preliminary empirical evidence that shareholder activists target companies because of their size as well as specific stakeholder-related practices. The data show that shareholder activists target companies with shareholder resolutions demanding changes in corporate behaviors for companies producing problematic products and where environmental concerns exist. Furthermore, companies in specific industries are targeted based on poor employee and community-related practices. Activists, that is, are selective in their targeting of companies, choosing the most visible (largest) companies and those whose practices (...) raise specific issues of interest to society. (shrink)

Research suggests that international assignment experience enhances awareness of societal stakeholders, influences personal values, and provides rare and valuable resources. Based on these arguments, we hypothesize that CEO international assignment experience will lead to increased corporate social performance (CSP) and will be moderated by the CEO's functional background. Using a sample of 393 CEOs of S&P 500 companies and three independent data sources, we find that CEO international assignment experience is positively related to CSP and is significantly moderated by the (...) CEO's functional background. Specifically, CEOs with international assignment experience and an output functional background (e.g., marketing and sales) are positively associated with greater CSP. (shrink)

This article examines the effects on cost stickiness of firms’ involvement in corporate social responsibility activities. Cost stickiness represents asymmetric cost behavior whereby the magnitude of cost increases in response to an increase in the activity level is greater than the magnitude of cost decreases with a decrease in the activity level. We hypothesize that CSR involvement requires ongoing investments in value-creating activities; hence, it is difficult to scale down committed resources instantly even when the activity declines. We use two (...) different CSR proxies and find support for the CSR-related cost stickiness hypothesis. We further decompose CSR into strategic and tactical CSR and find that cost stickiness is more pronounced for strategic CSR. Finally, we examine the CSR-related cost behavior pattern across business cycles and find some evidence of cost stickiness during an expansionary phase of the economy and cost anti-stickiness during a recessionary phase but only for the tactical CSR component. (shrink)

To encourage corporations to contribute positively to the environment in which they operate, voluntary self-regulatory codes (SRC) have been enacted and refined over the past 15 years. Two of the most prominent are the United Nations Global Compact and the Global Reporting Initiative. In this paper, we explore the impact of different stakeholders' pressures on the selection of strategic choices to join SRCs. Our results show that corporations react differently to different sets of stakeholder pressures and that the SRC selection (...) depends on the type and intensiveness of the stakeholder pressures as well as the resources at hand to respond to those pressures. Our contribution offers a more specific and finely variegated analysis of firmstakeholder interactions. (shrink)

In this paper, we seek to answer two questions: (1) what does boardroom diversity stand for in the strategic management literature? And, (2) is there a significant relationship between boardroom diversity and corporate social performance. We first clarify the boardroom diversity concept, distinguishing between a structural diversity of boards and a demographic diversity in boards, and then we investigate its possible linkage to social performance in a sample of S&P500 firms. We find a significant relationship between diversity in boards and (...) social performance. This relationship is moderated by diversity of boards. Our results also reveal the effects of the specific variables that make up the diversity of boards and diversity in boards constructs. In particular, gender, and age have a significant effect on corporate social performance. Some important measurement issues are raised and discussed. (shrink)