Business Commons^™

International Business Is Contributing To Environmental Crises, Haitao Yu Dr, Pratima (Tima) Bansal Dr., Diane-Laure Arjaliès

Business Publications

All business contributes to environmental crises because of its focus on profit. We argue that international business (IB) contributes more than its fair share. IB's focus on cross-border arbitrage has led to the over-extraction of natural resources and the accumulation of waste. This is a problem, because natural resources are limited in quantity and embedded in their local environment. It is time for IB researchers to step up and substantially and meaningfully address IB’s contribution to environmental crises by embracing the principles of natural systems processes within its core assumptions and improving its theorizing of natural resources. In this paper, …

The Motivations And Practices Of Impact Assessment In Socially Responsible Investing: The French Case And Its Implications For The Accounting And Impact Investing Communities, Diane-Laure Arjalies, Pierre Chollet, Patricia Crifo, Nicolas Mottis

Business Publications

This research note elaborates on the impact assessment practices of the French Socially Responsible Investing (SRI) industry. The research was conducted by the Scientific Committee of the French public SRI label based on interviews, participative observation, a survey, and documentary evidence. SRI is usually distinguished from impact investing in terms of investors’ different intentions (contributing to sustainable development in a financially savvy way for SRI vs. demonstrating a societal impact for impact investing). We show that, beyond this distinction, the meanings and motivations behind impact assessment in the SRI community are broadly different from impact assessment practices in impact investing, …

Prison Break From Financialization: The Case Of The Pri Reporting And Assessment Framework, Diane-Laure Arjaliès, Daniela Laurel, Nicolas Mottis

Business Publications

Purpose

This article seeks to unravel the mechanisms through which financial actors agreed upon a sustainability accounting standard without financializing social and environmental issues, i.e., assigning a monetary value to sustainability.

Design/Methodology/Approach

The article examines the Reporting and Assessment Framework created by the United Nations Principles for Responsible Investment (UN-PRI), the leading reporting sustainability framework in the asset management industry. It relies on a longitudinal case study that draws upon interviews, participant observation, and archival data.

Findings

The article demonstrates that the conception of the framework was a funnelling process of sustainability valuation comprising two co-constituted mechanisms: a process of …

Corporate Social Responsibility And Ceo Risk-Taking Incentives, Zhichuan Li

Business Publications

We examine how firms adjust CEO risk-taking incentives in response to risk environments associated with their corporate social responsibility (CSR) standing. We find strong evidence that as a firm's CSR status improves (declines), increasing (decreasing) its risk-taking capacity, the firm responds by adjusting compensation contracts to increase (decrease) CEO risk-taking incentives (Vega). One channel of the adjustment is through stock option grants. Further analyses indicate that the positive CSR-Vega association is stronger in firms with better corporate governance and in industries where riskiness is more important. Our evidence indicates that firms are not passive in response to changes in CSR …

The Role Of Mutual Funds In Corporate Social Responsibility, Zhichuan Li, Saurin Patel, Srikanth Ramani

Business Publications

This paper examines the role of mutual funds in corporate social responsibility (CSR). Using a fund-level, holdings-based CSR score, we find that CSR-friendly mutual funds improve firms’ CSR standings. This effect is more pronounced for firms with higher mutual fund ownership and stronger corporate governance. We further show that while CSR-friendly mutual funds have influence on almost all CSR categories, they focus on increasing CSR strengths rather than reducing CSR concerns. We also discover that CSR-friendly funds are more likely to vote in favor of CSR proposals, and that firms owned by CSR-friendly funds are more likely to link their …

A Learning Curve Of The Market: Chasing Alpha Of Socially Responsible Firms, Zhichuan Li, Jun Wang, Dylan Minor, Chongyu Dang

Business Publications

This paper explores stock market reactions to corporate social performance. We find that a value-weighted portfolio based on the list of “100 Best CSR companies in the world”, published by Reputation Institute, yields statistically significant annual abnormal returns of 1.63% and 1.26%, by controlling for Carhart four factors and Fama-French five factors, respectively (2.39% and 1.84% respectively for an equal-weighted portfolio). Moreover, such abnormal returns decrease as time goes, especially after the inaugural publication of the CSR lists in 2013. The paper also indicates that companies with better social performance are more likely to have positive earnings surprises, and that …

Csr-Contingent Executive Compensation Contracts, Zhichuan Li

Business Publications

Firms have increasingly started tying their executives’ compensation to CSR-related objectives. In this paper, we attempt to understand why firms offer CSR-contingent compensation and the conditions under which such compensation improves corporate social performance. Using hand-collected data from proxy statements, we find that this emerging compensation practice varies significantly across industries and across different CSR categories. Further, well-governed firms are more likely to offer CSR-contingent compensation, and such compensation does lead to higher corporate social standing. Such firms are more likely to offer formula-based, Objective CSR-contingent compensation. However, our results suggest that non-formulaic, Subjective CSR-contingent compensation also helps improve companies’ …

The Effect Of Corporate Visibility On Corporate Social Responsibility, Zhichuan Li, Taylor Morris, Brian Young

Business Publications

Outside of direct ownership, the general public may feel it is an implicit stakeholder of a firm. As the public becomes more vested in a firm’s actions, the firm may be more likely to engage in Corporate Social Responsibility (CSR) activities. We proxy for the public’s stake in a firm with public visibility. Based on 3,400 unique newspaper publications from 1994 to 2008, we measure visibility for the U.S. S&P 500 firms with the frequency of print articles per year concerning the firm. We find that visibility has a signficant, positive relationship with the CSR rating. Evidence also suggests this …

Product Categories As Judgment Devices: The Moral Awakening Of The Investment Industry, Diane-Laure Arjaliès, Rodolphe Durand

Business Publications

Product categories are more than classification devices that organize markets; when reflecting market actors' purposes, they are also judgment devices. Taking stock of the literature on product categories and drawing on the distinction between the faculties of knowing and judging, we elaborate a framework that accounts for how and why market actors include or exclude normative attributes in a product category definition. Based on a field study of the development of Socially Responsible Investment (SRI) funds in France, we describe the phases and conditions of a judgment framework for category definition, for both established and nascent categories. We discuss implications …

Product Categories As Judgment Devices: The Moral Awakening Of The Investment Industry, Diane-Laure Arjalies

Business Publications

Product categories are more than classification devices that organize markets; when reflecting market actors' purposes, they are also judgment devices. Taking stock of the literature on product categories and drawing on the distinction between the faculties of knowing and judging, we elaborate a framework that accounts for how and why market actors include or exclude normative attributes in a product category definition. Based on a field study of the development of Socially Responsible Investment (SRI) funds in France, we describe the phases and conditions of a judgment framework for category definition, for both established and nascent categories. We discuss implications …

Ethical Responsibility - An Arendtian Turn In Leadership Ethics, Rita A. Gardiner Ph.D

Education Publications

This paper adopts an Arendtian approach to consider the interconnections among responsibility, ethics, and leadership. Considering responsibility through an Arendtian lens may offer insights into leadership ethics. These insights may help deepen our understanding of the nascent theory of responsible leadership. In particular, Arendt's emphasis on judgment illustrates the importance of responsible action. Engaging with the Arendtian corpus may help us rethink connections among leadership, ethics, and responsibility in new and productive ways. This engagement with Arendt's work can in turn add value to thinking about responsible, ethics, and leadership.

Ceo Power, Corporate Social Responsibility, And Firm Value: A Test Of Agency Theory, Zhichuan Li

Business Publications

Purpose

The purpose of this paper is to explore whether firms with powerful chief executive officers (CEOs) tend to invest (more) in corporate social responsibility (CSR) activities as the over-investment hypothesis based on classical agency theory predicts.

Design/methodology/approach

This paper tests an alternative hypothesis that if CSR investment is indeed an agency cost like the over-investment hypothesis suggests, then those activities may destroy firm value.

Findings

Using CEO pay slice (Bebchuk et al., 2011), CEO tenure, and CEO duality to measure CEO power, the authors show that CEO power is negatively correlated with firm’s choice to engage in CSR …

Corporate Governance And Executive Compensation For Corporate Social Responsibility, Zhichuan Li

Business Publications

We link the corporate governance literature in financial economics to the agency cost perspective of corporate social responsibility (CSR) to derive theoretical predictions about the relationship between corporate governance and the existence of executive compensation incentives for CSR. We test our predictions using novel executive compensation contract data, and find that firms with more shareholder-friendly corporate governance are more likely to provide compensation to executives linked to firm social performance outcomes. Also, providing executives with direct incentives for CSR is an effective tool to increase firm social performance. The findings provide evidence identifying corporate governance as a determinant of managerial …

Le Mouvement De L’Investissement Socialement Responsable: Une Mise En Perspective Historique (The Sri Movement: An Historical Perspective), Diane-Laure Arjaliès

Business Publications

French Abstract: Ce chapitre offre un panorama historique de l'ISR en France et dans le reste du monde.

English Abstract: This chapter provides an historical overview of the SRI movement in France and worldwide.

The Use Of Management Control Systems To Formulate And Implement Csr Strategy: A Levers Of Control Perspective, Diane-Laure Arjaliès, Julia Mundy

Business Publications

Little is known about the role of management control systems (MCS) in managing the strategic processes that underpin Corporate Social Responsibility (CSR). To enhance our understanding of this phenomenon, this study employs Simons’ (1995) levers of control framework to explore how organizations leverage MCS in different ways in order to drive strategic renewal and trigger organizational change while simultaneously supporting society’s broader sustainability agenda. Drawing on data gathered from France’s largest listed companies – members of the CAC 40 – we provide insights into the structures and processes that companies employ to design, implement and monitor their CSR strategy. In …

Approches Stratégiques Des Émissions Co2: Les Cas De L’Industrie Cimentière Et De L’Industrie Chimique, Diane-Laure Arjaliès, Goubet Cécile, Jean-Pierre Ponssard

Business Publications

La capacité des entreprises à transformer une contrainte environnementale en source d’opportunité stratégique est un sujet controversé dans la littérature. S’appuyant sur une étude comparative des stratégies de lutte contre les émissions CO2 mises en place par les industries cimentière et chimique, l’article1 démontre que la latitude des entreprises à adopter une approche proactive face au développement durable est fortement contrainte par les caractéristiques du secteur en termes de dépendance vis-à-vis des ressources naturelles, de flexibilité dans la composition du portefeuille d’activités et de structure du secteur aval.

A Social Movement Perspective On Finance: How Socially Responsible Investment Mattered, Diane-Laure Arjaliès

Business Publications

This study discusses how social movements can influence economic systems. Employing a political–cultural approach to markets, it purports that ‘compromise movements’ can help change existing institutions by proposing new ones. This study argues in favor of the role of social movements in reforming economic institutions. More precisely, Socially Responsible Investment (SRI) movements can help bring SRI concerns into financial institutions. A study of how the French SRI movement has been able to change entrenched institutional logics of the French asset management sector provides wide-ranging support for these arguments. Empirical findings are drawn from a longitudinal case study (1997–2009), based on …

What Makes For Effective Labor Representation On Pension Boards?, Johanna Weststar, Anil Verma

Management and Organizational Studies Publications

This article examines the efficacy of labor representation on pension boards. Using existing literature and interviews with labor trustees, this article develops a model where a more formal approach to recruitment and selection, skill acquisition, and accountability is hypothesized to aid labor trustees in achieving effective integration and representation on pension boards. Data indicate that labor trustees are placed in a challenging environment with insufficient support from their union, other trustees, or the board. These findings have important implications for the selection, training, and integration of labor trustees and the success of a labor agenda on pension issues.