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Employee Political Affiliation as a Driver of Corporate Social Responsibility Intensity
While the primary goal of corporations is to maximize shareholder wealth, firms often engage in activities designed to serve the communities in which they operate. For example, diversity, environmental, and human rights initiatives offer stakeholders (e.g., citizens, creditors, employees, government, suppliers, unions, etc.) value beyond the goods and/or services that the corporation produces. One important question is whether corporate social responsible (CSR) activities are undertaken with the intent to increase firm value (via greater customer loyalty and brand recognition, for example) or as a result of corporate personnel pursuing their personal social agendas using the firm as a conduit.
In a recent paper (Employee Political Affiliation as a Driver of Corporate Social Responsibility Intensity, Applied Economics, 2018), I examine the role that political affiliation plays in determining CSR investment levels.
If personal political orientation drives CSR, then it is less likely that CSR is profit-driven and may instead arise from the personal moral imperatives of corporate employees. To measure political affiliation I first collect data on 23,000,000 federal campaign contributions over the past two decades. Each data point contains the name of the donor, the amount of the contribution, the contributor’s employer, and the associated party affiliation of the donation (e.g., republican or democrat). I then match each donation to each publicly traded firm and develop a measure that reflects the relative proportion of corporate employees who are democratic.
I find that democratically-oriented firms engage more heavily in CSR activities. Since democratic tenets include social inclusion, responsibility to the community, progressive taxation, and consumer protection, this finding is not surprising. However, it suggests that corporate personnel tend to use the firm as a conduit to enact social change. Therefore, CSR initiatives may be less about pursuing profitability and more about following personal belief systems.
I also demonstrate that lower-level employee political affiliation is a stronger determinant of firm CSR intensity than is higher-level (executive) affiliation. There is anecdotal support for this grassroots perspective. For example, Ben and Jerry’s describes its corporate philanthropy program, The Foundation, as ‘employee-led by nonmanagement employee advisory groups.’ Additionally, Cisco, Ingersoll Rand, Air France, KLM, and Johnson Controls serve as additional examples of organizations taking a bottom-up approach to CSR in practice.
Ideally, CSR initiatives would simultaneously serve the community and maximize corporate value. My research is therefore potentially useful to business owners because it highlights that when CSR initiatives are driven by a profit motive and are carefully implemented via a centrally-coordinated and tightly-focused program they may be financially rewarding. However, under other circumstances, perhaps when CSR comes about primarily as an expression of employees’ personal sociopolitical views, it may not be value-maximizing.
To access the full paper, click here.