Amazon isn’t known for its corporate social responsibility (CSR) efforts—the Seattle Times once called it a “corporate scrooge.” It doesn’t appear on Corporate Responsibility Magazine’s 2015 list of the 100 best corporate citizens either, though many technology companies do.
Who should be held accountable for Amazon’s corporate citizenship? Harvard Business Review gave CEO Jeff Bezos poor marks on that front. But according to research from Chicago Booth’s John Barrios, Marco Fasan of Ca’ Foscari University of Venice, and University of Miami’s Dhananjay Nanda, shareholders are the ones who have to answer for the company’s social impact.
To learn who drives CSR efforts, the researchers studied firms at which CEOs were forced out after poor financial performance, looking for links to CSR ratings. In a sample of 1,111 publicly listed US companies, they find a positive correlation between a company’s CSR ranking and the likelihood that its CEO was dismissed. Firms with higher CSR rankings were more likely to dismiss their CEOs due to poor financial performance, the research finds. By contrast, CEOs insulated from the threat of job removal were employed at companies with low CSR rankings.
To determine if CSR activities are an institutional or managerial characteristic, the researchers reviewed companies’ commitment to CSR following a CEO’s departure. They find for firms that had CEOs leave, company ratings did not significantly change, suggesting that corporate owners (shareholders, for listed companies), more than managers, drive CSR.
Moreover, when the researchers looked at companies’ CSR ratings before a CEO’s arrival, they find that the CSR score under the previous regime was predictive of the likelihood that the CEO job would turn over, further confirming a relationship between well-managed firms and high CSR ratings.
The research establishes a relationship between a firm’s CSR and the effectiveness of its corporate governance. Barrios, Fasan, and Nanda find a positive relationship between a high CSR ranking and the likelihood that a company has the characteristics often associated with effective governance, such as a large board of directors, a large percentage of independent directors, and high stock ownership by the CEO and directors.
CSR, the findings suggest, is driven more by the wishes of shareholders than by individual managers’ attempts to do the right thing.
John Barrios, Marco Fasan, and Dhananjay Nanda, “Is Corporate Social Responsibility an Agency Problem? Evidence from CEO Turnovers,” Working paper, July 2015.