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Corporate social responsibility researcher discusses study on shareholders and social influence of investments

Tuesday, October 17, 2017

LAWRENCE — A recent journal article and post in the Harvard Business Review argues that corporate directors should not only have an eye on value or profits but also on the welfare of their shareholders, especially related to the environmental and social impact of their investments.

A University of Kansas researcher who has studied corporate social responsibility is available to discuss issues surrounding the topic.

Jessica Li, assistant professor of marketing and consumer behavior in the School of Business, co-authored a 2016 study on global corporations and corporate social responsibility, or CSR, which involves promoting positive social and environmental change. CSR can be a strategic decision for companies seeking to boost their image of earning goodwill or support of certain causes in an effort to improve their reputation.

"It's important to study CSR because consumers have more options now than ever. Important segments, such as millennials, say it is a major consideration in their purchasing decisions," Li said. "In addition, so many companies engage in CSR that not taking social goals into consideration can stand out in a negative way. Social media and word-of-mouth marketing should also be of interest to shareholders because negative information about their company can be devastating to the bottom line, while positive corporate actions can go viral and boost sales."

The recent study by economists at Harvard and the University of Chicago argues that shareholders care about more than just money and want the companies they invest in to focus on social causes as well. This idea rebuts work of economist Milton Friedman who argued the only responsibility of business was to maximize profits, the economists said.

"This makes sense because shareholders are subject to the same psychological biases as every other consumer," Li said.

Her own research on corporate social responsibility addresses factors that can influence the utility shareholders would derive from pro-social company behaviors.

"First, it is important to note that people make different attributions for company actions, even if those actions appear to be for the greater good. Altruistic attributions result in more positivity toward the company but are not guaranteed," she said. "To the extent that shareholders genuinely care about social issues, they will want to know that the company has a sincere interest in contributing to society."

Her paper also showed the shareholder's cultural orientation and the extent to which he or she views the company as part of the in-group can influence those types of attributions. Besides acknowledging these factors in their decision-making, board members can increase the likelihood of garnering positive reactions by showing their commitment to a cause, she said.

"The longer the firm has worked toward achieving a social goal, the more likely shareholders will be to believe it genuinely cares about bettering society," Li said. "Hence, it may be better to identify one or two issues to invest in and support for a long period of time rather than scratching the surface of a multitude of problems."

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