Marc Orlitzky

Corporate Social and Financial Performance: A Meta-Analysis

Most theorizing on the relationship between corporate social/environmental performance (CSP) and corporate financial performance (CFP) assumes that the current evidence is too fractured or too variable to draw any generalizable conclusions. With this integrative, quantitative study, we intend to show that the mainstream claim that we have little generalizable knowledge about CSP and CFP is built on shaky grounds. Providing a methodologically more rigorous review than previous efforts, we conduct a meta-analysis of 52 studies (which represent the population of prior quantitative inquiry) yielding a total sample size of 33,878 observations. The meta-analytic findings suggest that corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility is likely to pay off, although the operationalizations of CSP and CFP also moderate the positive association. For example, CSP appears to be more highly correlated with accounting-based measures of CFP than with market-based indicators, and CSP reputation indices are more highly correlated with CFP than are other indicators of CSP. This meta-analysis establishes a greater degree of certainty with respect to the CSP-CFP relationship than is currently assumed to exist by many business scholars.

Corporate Social Performance and Firm Risk: A Meta-Analytic Review:

Building on earlier work on the relationship between corporate social performance (CSP) and a firm’s financial performance, this integrative empirical study supports the theoretical argument that the higher a firm’s CSP the lower its financial risk. Specifically, the relationship between CSP and risk appears to be one of reciprocal causality, because prior CSP is negatively related to subsequent financial risk, and prior financial risk is negatively related to subsequent CSP. Additionally, CSP is more strongly correlated with measures of market risk than measures of accounting risk. Of all CSP measures, reputation for social responsibility appears to be the most important one in terms of its risk implications.

Strategic Corporate Social Responsibility and Environmental Sustainability

The authors review three theoretical approaches to strategic corporate social responsibility (CSR), which can be defined as voluntary CSR actions that enhance a firm’s competitiveness and reputation. The end result of such activities should be an improvement in financial and economic performance. Based on an overview of recent empirical evidence, the authors conclude that economic theories of strategic CSR have the greatest potential for advancing this field of inquiry, although theories of strategic leadership should also be incorporated into this perspective. In the remainder of the article, they provide focused summaries of the articles presented in this special issue and outline an agenda for future research on strategic CSR and environmental sustainability.

To Err is Human, to Correct for it Divine A Meta-Analysis of Research Testing the Functional Theory of Group Decision-Making Effectiveness

This meta-analysis tests the functional perspective of small-group decision making, which holds that certain critical requisite functions must be satisfied for an effective group decision to be likely. The results suggest that evaluation of negative consequences of alternative solutions, problem analysis, and establishment of solution criteria (in this order) are the strongest predictors of group decision-making effectiveness. In addition, methodological study artifacts (sampling error, measurement error) and task moderators explain variability in previous findings. More specifically, the moderator subgroup analysis shows that evaluation of negative consequences is an even better predictor of group performance when task evaluation demands are high.

Alternative pathways to high-performance workplaces

In this paper we outline four high workplace performance models, two of which have high-road or enabling characteristics. These are the strategic human resource management and organizational trust models, respectively. The second two models – the labour process and numerical flexibility models – motivate workers to raise productivity through the use of the stick (coercion) rather than the carrot. Based on a representative survey of Australian workers, we compare these models in terms of their capacity to explain relative workplace productivity. We find that all four models have some explanatory power. However, contrary to expectations, the low-road numerical flexibility model provides the best fit with the data. We interpret this finding by reference to recent evidence of workforce trends indicating the attraction and ability of employers to pursue this pathway toward higher productivity. We conclude with some suggestions for future research that would assist in developing this line of enquiry.

Payoffs to Social and Environmental Performance

More and more managers believe socially and environmentally responsible organizational actions pay off financially. Many academic researchers do not share this belief. They tend to assume corporate social responsibility must be considered a cost factor, because it has no counterbalancing positive impact on employees, investors, customers, and many other stakeholders. This article summarizes the empirical evidence accumulated to date and concludes which side seems to be right.

Sustainable Development and Financial Markets Old Paths and New Avenues

This article explores the role of financial markets for sustainable development. More specifically, the authors ask to what extent financial markets foster and facilitate more sustainable business practices. The authors highlight that their current role is rather modest and conclude that, on the old paths, a paradoxical situation exists. On one hand, financial market participants increasingly integrate environmental, social, and governance (ESG) criteria into their investment decisions, whereas on the other hand, in terms of organizational reality, there seems to be no real shift toward more sustainable business practices. The authors identify two main challenges within the field of sustainable investments that are relevant for entering new avenues that may help overcome this situation. First, a reorientation toward a long-term paradigm for sustainable investments is important. Second, ESG data must become more trustworthy. From a theoretical point of view, the authors finally highlight the potential market consequences when ESG investment criteria are used.

Organizational trustworthiness and workplace labor productivity: Testing a new theory

Based on a secondary analysis of the Australian Workplace Industrial Relations Survey, this study explores several relationships that may link trust to changes in labor productivity. Drawing on Hodson’s work, we examine how - and under what conditions - supportive employment practices and management’s operational competence may contribute to workers’ trust in management, which in turn is hypothesized to lead to an improvement in labor productivity over time. The findings support the hypothesis that more supportive employment practices lead to higher trust in management. However, a similar relationship between management’s operational competence and trust did not obtain, and there was very little connection between trust and improvements in workplace productivity. Further analysis showed that there was considerably more support for our hypotheses when applied to service sector firms: both supportive employment practices and management competence contributed to trust and higher trust led to more rapid incre...

The politics of corporate social responsibility or: why Milton Friedman has been right all along

Purpose – The purpose of this paper is to revisit the debate and reorient research on corporate social responsibility (CSR), empirically documents the political-ideological biases inherent in CSR. It concludes with possible remedies to this problem. Design/methodology/approach – The approach taken in this literature review is informed by the author’s viewpoint on the growing industry of social activists, who are pushing business toward the adoption of an ever-growing panoply of quasi-regulations commonly identified as CSR. The approach is complemented by a critique of stakeholder theory. Findings – The literature review provides empirical support for Milton Friedman’s (1970) claim that the values underpinning CSR are driven by a socialist-collectivist agenda, which is inherently opposed to capitalist/libertarian values of free enterprise and individualism. Practical implications – Without critical reflection on the leftwing ideology instantiated by CSR, the business community may unwittingly adopt and sus...

Corporate Governance and Business Ethics

This important volume re-integrates corporate governance and business ethics which are too often treated as separate entities. The editors have selected seminal works which refocus on the ethical import of corporate governance foundations. This collection also traces recent ways in which the ethics of corporate governance have been articulated through reviews of practice, ethical re-evaluations, agency theory, the stakeholder concept, and comparative and international developments. It brings together a range of alternative perspectives and new directions in this vital and dynamic field. The authoritative volume will be an essential source of reference for students and scholars concerned with the power and responsibility of corporations.