Companies That Do More Harm Also Do More Good

A new study strives to answer that age-old question: Why does the Goldman Sachs website brag about sending their employees to bake cupcakes for the Jewish Community Council of Canarsie?

Everyone has heard the old saw that companies can do well by doing good. But many companies actually appear to do more good when they are doing harm, according to a new paper [PDF] on corporate social responsibility (CSR). The researchers, Matthew J. Kotchen of the Yale School of Forestry & Environmental Studies and Jon Jungbien Moon of the business school at Korea University, surveyed nearly 3,000 publicly traded companies over 15 years. They write:

We seek to explain why companies engage in CSR, but we do not focus directly on the link to financial performance. Instead, we investigate the proposition that companies engage in CSR in order to offset corporate social irresponsibility (CSI). While the link to financial performance is implicit, our analysis seeks to evaluate a different causal mechanism underlying CSR: that CSI is a liability and companies do “good” in order to offset “bad.” 

The paper find evidence for what you might have already suspected: It's bad business to be seen as an irresponsible company, but an image as a socially responsible company can, to some extent, be bought with public do-gooding.

There is much empirical support for the notion that companies are penalized if they are perceived to conduct business in ways that conflict with social values. This is particularly true when inconsistencies arise between the pursuit of corporate profits and social goals—such as environmental protection, public health, and human rights, among others. In cases where the inconsistencies are large and there is sufficient public awareness, it is advantageous for companies to anticipate the social pressure and to take a proactive stance toward lessoning the potential for conflict. 

Tellingly, when the problem is perceptions of poor corporate governance—overpaid CEOs, for example, or lack of political accountability—the study finds that acts of corporate social responsibility increase, but not in the category of governance. Instead, companies choose to engage in projects related to the environment, community relations, or human rights. Thus the banker bakers. 

Of course, the definitions of good and harm here are slippery. For more on that, check out one of the best Reason features ever: Milton Friedman vs. Whole Foods CEO John Mackey vs. Cypress Semiconductors founder T.J. Rodgers on corporate social responsibility. 

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  • MNTupla||

    Why does the Goldman Sachs website send their employees to bake cupcakes for the Jewish Community Council of Canarsie?

    JOOOOOOOOOOOOOOOOOSSSSSSSSSSSSSSSSSSSSSSS!!!!!!!!!!!!!!!!!!!!!!!

  • Auntie Semitic||

    I can see my work here is done.

  • Fist of Etiquette||

    So they found that the PR business is booming, if not exceptionally effective.

  • BakedPenguin||

    Yeah, but this doesn't always work. When I sent some of my employees from the massage parlor I owned to the junior high to help out the children, you should have heard some of the crap I got.

  • ||

    THE FIVE YEAR [PRC] PLAN - Ending the hierarchical [EMPIRE/$USD$] base currency system.


    [ENOUGH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1]


    It has reached the point were it has become necessary for the [PRC] Peoples Republic of China and the International Geo-Economic Spheres of Parity too begin a steady diversification towards other than [$USD$] assets, global investors have only one choice left and that is too follow the [PRC] and say enough to [EMPIRE], assumptions that it would all work out because life is sweet and the best thing in life always happens, and not the inescapable fact, which is immeasurable and can not be countered – uncertainty, and that even the best laid plans of mice and men go astray, but slow and easy wins the race more than not in building sound economic stability. The [PRC] can not, nor will it continue to support an [EMPIRE] thru the continued folly of borrowing [40%] of its daily operating expenses. The [EMPIRE] has been afforded more leeway, by convention, to pay lower [PRC] and international interest rates via., the confidence in their ability to support international debt, but once that debt now will exceeds [100%] the interest rate on the debt equals the nominal growth rate, and at that point growth becomes untenable, and stops. This determined by Debt divided by [GDP] Gross Domestic Product, which stands, at present, at [97%], and is expect to reach [124%] by [2015] must be reduced to no more than [60%]. The [EMPIRE] abandoned this debt to [GDP] ration and now has put the [PRC] and entire global economy in peril.


    [Stepping out of pot hole not over cliff]


    The independent [PRC] Republic of China which has its own State Run and Funded Rating Agency Dagong Global Ratings Co., Ltd., and which had previously down graded the [EMPIRE] ratings from an [AA] rating to [A+] on [November 9th, 2010] in response to the [2nd] round of the [QE-2$USD$] Quantitative Easing Two has now once again placed the [EMPIRE] on a negative watch list as once again the [EMPIRE] raises the specter of a [QE-3$USD$] financial action of a [12%] weaker [$USD$], and can now be expected to once again downgrade the [EMPIRE], do to the nonchalant, cavalier attitude of the [EMPIRE] that the [PRC], will continue to make up [EMPIRE] reckless spending, financed by debt, borrowing from the [PRC],, to tide the [EMPIRE] over a period of investment deficiency, as not a temporary stop gap measure, and but as a permanent solution of [EMPIRE] geo-economics and therefore the Global Economic landscape, has had enough, and will no longer risk the financial and stability of the [PRC], over the [EMPIRES] lack of economic stewardship of the base economic structure of the Worlds Geo-Economic System, and must risk minor short terms loss in comparison to major long term damage, the [PRC] has had ENOUGH! In the end the solution is taking a short term loss, and downturn in [PRC] economic interests, of long term growth, is doesn't take a wise to know that it is better to step out of a pot hole by one's self, than step over a cliff holding hands with a fool.


    [The Five Year Program of Chinese Gradualism of Diversification]


    To this end the [PRC] Peoples Republic of China State Council using the proven technique of always starting slowly and gradually expanding, allowing for a new plan to take shape, giving time to make course changes as necessary to respond and counter those immeasurable uncertainties which could occur during the [5] year program of Gradualism of Diversification upon which it has embarked too be complete by the year [2015], ending its connection to the [EMPIRE] present base [$USD$] currency system, to a Diversified/Multilateral Currency Regime, based upon a broader trade-weighted basket. The Multilateral Currencies would be the new Global Numeraire Currency, made up of the nations of the (BRICS), Brazil, The Russian Federation, India, The Peoples Republic of China, and the Republic of South Africa, the [EU] European Union, Spheres of Global Economic Parity Influence Economic in the [21st] Century flexing their collective muscles geo-politically-economically-militarily, ending the Hierarchical [EMPIRE] base currency system. Based upon a basket of [Euro, Pound Sterling, Japanese Yen, and Chinese Yuan], and hard currency Gold, Silver, Oil and Mineral Currency [Gold, Silver, Lithium, Rare Earth etc.], Food Production Currency, and Production Currency creating a less volatile currency based system, against price fluctuations, virtually context-free of the chance of their value disappearing entirely.


    HERCULE TRIATHLON SAVINIEN

  • Barely Suppressed Rage||

    Dude, you must be a blast to party with.

  • ||

    I imagine him showing up to the party with a Fear & Loathing-caliber suitcase.

  • Scruffy Nerfherder||

    Herc is back!

    Good thing too. I was starting to itch, I needed my brackets fix.

  • ||

    THE [PDRC] PEOPLES DEMOCRATIC REPUBLIC OF CHINA – Walking out of pot hole not stepping over cliff.


    [Slow and Easy Wins]


    It has reached the point were it has become necessary for the [PDRC] Peoples Democratic Republic of China and the International Geo-Economic Spheres of Parity too begin a steady diversification towards other than [$USD$] assets, global investors have only one choice left and that is too follow the [PDRC] and say enough to [EMPIRE], assumptions that it would all work out because life is sweet and the best thing in life always happens, and not the inescapable fact, which is immeasurable and can not be countered – uncertainty, and that even the best laid plans of mice and men go astray, but slow and easy wins the race more than not in building sound economic stability. The [PDRC] can not, nor will it continue to support an [EMPIRE] thru the continued folly of borrowing [40%] of its daily operating expenses. The [EMPIRE] has been afforded more leeway, by convention, to pay lower [PDRC] and international interest rates via., the confidence in their ability to support international debt, but once that debt now will exceeds [100%] the interest rate on the debt equals the nominal growth rate, and at that point growth becomes untenable, and stops. This determined by Debt divided by [GDP] Gross Domestic Product, which stands, at present, at [97%], and is expect to reach [124%] by [2015] must be reduced to no more than [60%]. The [EMPIRE] abandoned this debt to [GDP] ration and now has put the [PDRC] and entire global economy in peril.


    [Walking out of pot hole not stepping over cliff]


    The independent [PDRC] Peoples Democratic Republic of China which has its own State Run and Funded Rating Agency Dagong Global Ratings Co., Ltd., and which had previously down graded the [EMPIRE] ratings from an [AA] rating to [A+] on [November 9th, 2010] in response to the [2nd] round of the [QE-2$USD$] Quantitative Easing Two has now once again placed the [EMPIRE] on a negative watch list as once again the [EMPIRE] raises the specter of a [QE-3$USD$] financial action, and can now be expected to once again downgrade the [EMPIRE], do to the nonchalant, cavalier attitude of the [EMPIRE] that the [PDRC], will continue to make up [EMPIRE] reckless spending, financed by debt, borrowing from the [PDRC] Peoples Democratic Republic of China, to tide the [EMPIRE] over a period of investment deficiency, as not a temporary stop gap measure, and but as a permanent solution of [EMPIRE] geo-economics and therefore the Global Economic landscape, has had enough, and will no longer risk the financial and stability of the [PDRC], over the [EMPIRES] lack of economic stewardship of the base economic structure of the Worlds Geo-Economic System, and must risk minor short terms lose in comparison to major long term damage, the [PDRC] has had ENOUGH! In the end the solution is taking a short term loss, and downturn in [PDRC] economic interests, of long term growth, it is better to step out of a pot hole, than walk over a cliff.


    HERCULE TRIATHLON SAVINIEN

  • Barely Suppressed Rage||

    This is, to an extent, what various environmental mitigation "banks" and "markets" are about. You want to destroy some wetlands to build a power plant/mall/widget factory? You can pay some other entity to create some new wetlands somewhere else to offset the ones you're destorying.

    You want to expand your factory to increase production capacity, but it also will increase greenhouse gas emissions? You can pay another entity to shut down its old, outdated (and thus more heavily polluting) equipment. Or pay to have so many acres of forest preserved. Or have greenhouse gases eliminated somewhere else. Or buried.

    Some of these "allowances" are traded as commodities. There are companies that exist solely for the purposes of "mitigation banking" - they make money by industry engaging in these practices.

  • Barely Suppressed Rage||

    TL; DR; kthxbai.

  • Pip||

    "Were Number Two"

    Then we're in agreement.

  • yonemoto||

    dude why don't you write a novel or something.

  • DJF||

    He is, and publishing it for free at Reason.

  • ||

    Hercule: The Novel is a little more verbose than LoneWacko: The Novel.

  • T||

    You don't know that, Epi. It all depends on how many times LoneWacko pasted 'GoddamnedMexicans' into his novel.

  • cynical||

    Public piety to cover private wickedness. Nothing new under the sun.

  • Pip||

    This study is just bullshit.

  • Achtung Coma Baby||

  • Achtung Coma Baby||

    I'll add: Fuck you too, PZ!

  • ||

    Energised Democrats are so tiresome. The guy spoke gibberish for goodness sake.

  • Matt Damon||

    Teachers do it because they love it! That's the only reason they do it!

    Nevermind the couple of months off, the near impossibility of getting fired, the pensions, the insurance.....

  • Montani Semper Liberi||

    Right, which is why they have been so eager to negotiate on pension and health insurance contributions with so many states and municipalities facing big budget deficits. They will gladly pay an extra $10/month for health insurance to help cut costs and balance the budget because they are teaching for the love of it, not for the benefits.

  • Achtung Coma Baby||

    To my surprise, one of the Pharyngulites brought this point up.

  • ||

    Right, which is why they have been so eager to negotiate on pension and health insurance contributions with so many states and municipalities facing big budget deficits.

    Oh so true at many of the school districts here. The schools had to lay off a lot of teachers, all with less seniority. The ones negotiating are the teachers with the most seniority with no danger of losing their job. The greed of these people exceeds anything I have ever seen in the private sector.

  • Warty||

    Do you suppose PZ Meyers is Hercule?

  • Achtung Coma Baby||

    I did learn through the comments at Pharyngula that Damon's next movie will be directed by Neill Blomkamp, so I can't say that Pharyngulites are entirely worthless.

  • ||

    Hercule is everything...and nothing.

  • Warty||

    Oh, yes, how silly of me, I nearly forgot.

    MATT DAMON!

  • Another Isolated Incident||

    Is Hercule going to come on the next Reason cruise, like Steve Smith last year?

  • ||

    Reason should sponsor a troll cruise, and then film it. It would be like watching hobos fighting over a steak, except that hobos usually aren't fat.

  • Warty||

    Can we sink the ship after it gets out to sea? If not, can we at least make sure cholera breaks out?

  • ||

    Dude, there would be enough slung feces on that cruise to ensure an E Coli breakout, and probably cholera too. No worries. Besides, with all that fat, the boat will probably capsize.

  • CE||

    A cruise ship can only carry so much stupid.

  • cynical||

    Just tell Alternet folks it's a Reason cruise and hand them a rocket launcher. Film it, turn the film over to the police, kill two birds with one stone.

  • ||

    It's gotta be tough to do the control group on a study like that.

    You've got companies like Wal*Mart, Nike, McDonalds, Oil companies, et. al., all of whom have made really bad press in the past--and why wouldn't they do what they can to counteract that?

    Then you've got companies like Whole Foods, Ben & Jerry's, Toyota's Prius, et. al., who make doing good a full on market advantage. People will pay more for their products just for the cache...

    But how many companies out there for your control group get really bad press and do nothing about it? How many of them pursue socially responsible behavior like Whole Foods, without advertising that fact to their customers?

    Find me some companies that get terrible press nationwide and do nothing socially responsible to counteract that image--then we've got half the control group. Find me some companies whose products themselves do a whole lot of socially responsible stuff--that their customers don't know about--and then you've got the other half of the control group.

    I can't think of more than a few companies in either category.

  • ||

    This is like when you tell your kids to do (or not do) something, and they do what they want anyway, but say "but look mom, I cleaned the kitchen!"
    Would it not be better to just do what you should do in the first place?

  • WTF||

    Sort of like this?

  • WTF||

    @ Episiarch|8.2.11 @ 3:32PM|

    Fucking threaded comments, how do they work?

  • ||

    Yes, but fatter and stupider.

  • ||

    The evil, uh do-gooder, company that I work for has volunteer hours as part of the metric for the quarterly bonus checks.

    Since they've cut the bonus check due to financial concerns, the number of public-do-good hours has dropped like a rock. Surprise!

  • ||

    Mmmmmm, you can practically taste the Mandate.

  • CE||

    Companies that earn the highest profits are already doing the most good for society. Profits are the difference between what people willingly pay for products and services they want, less the costs in resources, capital, and labor to create those products and services. Since prices are set freely on the market to clear that market of goods, companies wasting the least resources to create those goods are the most profitable.

    Companies that make the biggest show of do-gooding are most likely the crooked ones, trying to assuage their guilt.

  • EDG reppin' LBC||

    Good point. But there is an agency issue here, perhaps. Bad publicity can hurt shareholder value, so offending corporations may be obligated to counteract that with "good publicity". Although it might not be the most efficient use of capital, I imagine that it is the Board that authorizes these "Good Corporate Citizens" campaigns on behalf of shareholders. A more interesting study would be to see if Boards discipline/fire management in proportion to their dollar outlay on these types of PR campaigns.

  • jtuf||

    Why is a professor at the Yale School of Forestry & Environmental Studies studying businesses? Why am I not surprised that an environmental professor concluded that businesses are not really good?

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