Corporate Saints and Sinners: The Effects of Philanthropic and Illegal Activity on Organizational Performance

Arlow P. Gannon M. J. , “Social Responsiveness, Corporate Structure, and Economic Performance,” Academy of Management Review, Vol. 7 (1982): 235–241.

Moskowitz M. , “Choosing Socially Responsible Stocks,” Business and Society Review/Innovation, Vol. 1 (1972): 71–72; Cochran P. L. Wood R. A. , “Corporate Social Responsibility and Financial Performance,” Academy of Management Journal, Vol. 27, No. 1 (1984): 42–56; Sturdivant F. D. Ginter J. , “Corporate Social Responsiveness: Management Attitudes and Economic Performance,” California Management Review, Vol. 19, No. 3 (1977): 30–39; Vance S. , “Are Socially Responsible Corporations Good Investment Risks?” Management Review, Vol. 64, No. 8 (1975): 18–24.

Alexander G. J. Buchholz R. A. , “Corporate Social Responsibility and Stock Market Performance,” Academy of Management Journal, Vol. 21 (September 1978): 479–486; Heinze D. C. , “Financial Correlates or Social Involvement Measure,” Akron Business and Economic Review, Vol. 7, No. 1 (1976): 48–51; Vance , op. cit.

Abbott W. F. Monsen J. R. , “On the Measurement of Corporate Social Responsibility,” Academy of Management Journal, Vol. 22 (September 1979): 501–515; Anderson J. C. Frankle A. W. , “Voluntary Social Reporting: An Iso-Beta Portfolio Analysis,” The Accounting Review, Vol. 55, No. 3 (1980): 467–479; Bowman E. H. Haire M. , “A Strategic Posture Toward Corporate Social Responsibility,” California Management Review, Vol. 18, No. 2 (1975): 49–58; Ingrahm R. W. , “An Investigation of the Informational Content of Certain Social Responsibility Disclosures,” Journal of Accounting Research, Vol. 16 (1978): 270–285; Preston L. E. , “Analyzing Corporate Social Performance: Methods and Results,” Journal of Contemporary Business, Vol. 7, No. 1 (1978): 138–144.

Bowman Haire , op. cit.; Bragdon J. H. Marlin J. A. T. , “Is Pollution Profitable?” Risk Management, Vol. 19, No. 4 (1972): 9–18; Chen K. H. Metcalfe R. W. , “The Relationship Between Pollution Control Record and Financial Indicators Revisited,” Accounting Review, Vol. 55(1980): 168–177; Folger H. R. Nutt P. , “A Note on Social Responsibility and Stock Variation,” Academy of Management Journal, Vol. 18 (1975): 155–160; Spicer B. H. , “Investors, Corporate Social Performance, and Information Disclosure: An Empirical Study,” The Accounting Review, Vol. 53, No. 1 (1978): 94–111.

Arlow Gannon , op. cit.; Aupperle K. E. Carroll A. B. Hatfield J. D. , “An Empirical Examination of the Relationship Between Corporate Social Responsibility and Profitability,” Academy of Management Journal, Vol. 28, No. 2 (June 1985): 446–463; Cochran Wood , op. cit.; Ullman A. A. , “Data in Search of a Theory: A Critical Disclosure and Economic Performance of U.S. Firms,” The Academy of Management Review, Vol. 10, No. 3 (July 1985): 540–557.

Lehman C. K. , “Some Methodological Problems in Studies of Corporate Social Responsibility and Financial Performance,” Paper Presented at the Academy of Management National Meeting, San Diego, CA, 1985.

Ross W. D. , The Right and the Good (Oxford, England, 1930).

Lehman op. cit.

Friedman M. , “The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine, Vol. 33 (September 1970), pp. 122–126.

Ibid, p. 23.

Carroll A. B. , “A Three-Dimensional Model of Corporate Performance,” Academy of Management Review, Vol. 4, No. 4 (1979): 497–505.

Sethi S. P. , “A Conceptual Framework for Environmental Analysis of Social Issues and Evaluation of Business Response Patterns,” Academy of Management Review, Vol. 4, No. 1 (1979): 63–74.

Conrad A. F. , “Response: The Meaning of Corporate Social Responsibility—Variations on a Theme of Edwin M. Epstein,” Hastings Law Journal, Vol. 30, No. 5 (1979): 1321–1326; Cracco E. Rostenni J. , “The Socio-Ecological Product,” MSU Business Topics, Vol. 19, No. 3 (1971): 27–34; Davis K. , “The Case For and Against Business Assumption of Social Responsibilities,” Academy of Management Journal, Vol. 16, No. 2 (1973): 312–322; Hamilton W. , “Industry's Responsibility in Employment, Training and Facility Location,” Industrial Development, Vol. 148, No. 3 (1979): 20–22; McGuire J. W. , Business and Society (New York, NY: McGraw-Hill Book Co., 1963); Preston L. E. Post J. E. , “Private Management and Public Policy,” California Management Review, Vol. 23, No. 3 (1981): 56–62; Rockerfeller D. , The Second American Revolution (New York, NY: Harper & Row, 1973); Shanklin W. L. , “Corporate Social Responsibility: Another View,” Journal of Business Research, Vol. 4, No. 1 (1976): 75–94. Stone C. D. , Where the Law Ends: The Social Control of Corporate Behavior (New York, NY: Harper & Row, 1975).

Foote S. B. , “Corporate Responsibility in a Changing Legal Environment,” California Management Review, Vol. 26, No. 3 (1984): 217–228.

In recent years, though, some of these so-called petty apartheid laws have been abolished in response to domestic and international pressure. Steiner G. A. Steiner J. F. , Business, Government, and Society: A Managerial Perspective, 4th Edition (New York, NY: Random House Business Division, 1985).

Lehman T. Johnson D. , The Economics of Charity (Blacksburg, VA: Center for the Study of Public Choice, 1970); Fry L. W. Keim G. D. Meiners R. E. , “Corporate Contributions: Altruistic or For Profit?” Academy of Management Journal, Vol. 25 (1982): 94–106.

There are those who would object to the notion of calling corporate philanthropy a supererogatory activity even if it is motivated solely by altruism. Friedman is probably the most articulate proponent of the view that corporate philanthropy should not be praised, but that it should be condemned (unless, of course, it is profit motivated, as in using it as a type of advertising to generate good will that will result in increased sales, improved employee morale, better community relations, etc.). See Friedman , op. cit. This is based on his view that corporate managers are spending someone else's money (that of its stockholders, its employees, and/or its customers) without their approval, and perhaps in ways contrary to their wishes. He would prefer to see all profits distributed to stockholders who could then decide what they wanted to do with their money—save it, invest it, spend it, or make their own charitable contributions. Others who have criticized corporate philanthropy as being undesireable include Drucker, Heyne, and Levitt. See, Zemke R. , “Peter Drucker: Nobody Sees It Better,” Training/HRD (February 1983); Heyne P. T. , “The Free-Market System Is the Best Guide for Corporate Decisions,” Financial Analysts Journal (September/October 1971); and Levitt T. , “The Dangers of Social Responsibility,” Harvard Business Review (July/August 1970).

Some critics of corporate philanthropy have challenged its legality. See, Blumberg P. I. , “Corporate Responsibility and the Social Crisis,” Boston University Law Review, Vol. 50(1970): 157, 192–202. However, in a 1953 landmark decision regarding this issue (A. P. Smith Manufacturing Company v. Barlow), the New Jersey Supreme Court ruled that corporate philanthropy, even without a clear, direct benefit to the company, was legal. See, A. P. Smith Manufacturing Co. v. Barlow et al. 26 N. J. Super. 106 (1953), 98 Atl. (2d) 581, 346 U.S. 861 (1953). Moreover, the Court's opinion also indicated that corporate philanthropy might actually be regarded as a civic duty of a good corporate citizen.

Mackin C. , “Ranking Corporate Reputations,” Fortune, Vol. 107 (January 10, 1983); 34–44.

Staw B. M. Szwajkowski E. , “The Scarcity-Munificence Component of Organizational Environments and the Commission of Illegal Acts,” Administrative Science Quarterly, Vol. 20 (1975): 345–354; Trade Cases: Trade Regulation Reports, Commerce Clearing House, Inc., 1980–1984.

The Corporate 500: The Directory of Corporate Philanthropy, 2nd Edition, 3rd Edition (San Francisco, CA: Public Management Institute, 1982, 1984).

In order to facilitate the interpretation of the study's findings, means and standard deviations were calculated for the social responsibility ratings and financial performance ratios within each group. In addition, Duncan's multiple range tests and Student t-tests were utilized to provide more detailed information on the differences that existed among these groups. While the ANOVA only indicates whether or not there are differences among group means, these tests identify exactly where those differences are.

In considering the question of whether corporate giving behavior or illegal activities were associated with expert ratings of CSR (PCSR), the ANOVA showed a statistically significant effect for corporate giving behavior, F(1,71)=26.88, p<.0001. The crime variable, however, was not significant, F(1,71) = 1.38, p<.244. Regarding financial performance, an identical pattern of results appeared for the Return on Sales ratio (ROS5). Here, corporate giving was again significant, F(1,67)=4.60, p<.036, while corporate crime was not, F(1,67)=2.18, p<.144. In contrast, both giving, F(1,69)=6.39, p<.014, and crime, F(1,69)=4.5, p<.037, appeared to have an impact upon the Return on Assets ratio (ROA5).

Ermann M. D. Lundman R. J. , Corporate Deviance (New York, NY: CBS College Publishing, 1982).

Schrager L. S. Short J. P. Jr. , “Toward a Sociology of Organizational Crime,” Social Problems, Vol. 25 (1978): 408.

Williams W. , “White Collar Crimes Booming Again,” New York Times, June 9, 1985, Section 3, pp. 1–6.

Anderson Frankle , op. cit.; Bragdon Marlin , op. cit.; Cochran Wood , op. tit; Heinze , op. cit.; Ingrahm , op. cit.; Moskowitz , op. cit.; Parket R. Eilbert H. , “Social Responsibility: The Underlying Factors,” Business Horizons (August 1975), pp. 5–10; Preston , op. cit.; Spicer , op. tit.

Lehman , op. cit., p. 13.

Cochran Wood , op. cit.; Ingrahm , op. cit.

Staw Swajkowski , op. cit.