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Are Corporate Social Responsibility Programs a Hedge Against Bad Behavior?

March 15, 2016

Companies often talk about doing good things for society, whether they actually meet those stated goals or not. But why have multi-billion-dollar firms invested so heavily in corporate social responsibility, (CSR) programs in the last few decades? Is corporate America engaging in socially conscious actions for honest reasons, or just to distract attention from its more harmful behaviors?

As The Atlantic reports, a new paper published in the Journal of Marketing investigates the motivations behind corporate CSR programs.

The study identified four potential reasons why companies undertake such initiatives. The first assumes that when a firm is doing well, it has plenty of extra money and uses some of it to create programs intended for social good.

Another theory is that companies view CSR programs as a sound management practice, since firms that focus on benefitting society can reap financial rewards from their enhanced reputations through increased sales, loyal customers and better employees.

Two other theories are more cynical: One is that firms engage in CSR to make amends for bad things they’ve done. Another is the insurance theory, which holds that companies create CSR programs to mitigate any damage to their brand that could occur from future misbehavior. But the study found that programs aimed at social good usually don’t offset the financial damage caused by bad actions, since such gestures can be seen as inauthentic or as insufficient compensation for wrongdoing. — Greg Beaubien


Kathy Ann Farrel says:

I have a hard time accepting that a company would do this for a deceptive reason. Social Responsibility programs are costly and not effective if they are not based on good will. An intelligent audience would see through this immediately and the consequences would be perilous for that company. The public quickly sees such things for what they really are.

March 16, 2016

Brian Andrew Massie says:

I believe, in general, that the latter two theories are generally correct. There is also an argument to made about organizations that have enough excess revenue to participate in CSR projects. Said organizations are assumed to be doing well enough to be worth investing in. A broker friend and I have had more than a few laughs about the phenomenon. The exception to these cases, as I've written about for PRNews, is the case of CSR for employees. The ROI of building a well in Africa is questionable. However, taking the same or even less money to fund working conditions improvements, incentives, and reward/recognition programs will generate a consistently higher ROI when compared to external CSR initiatives. Bottom line: If you're going to spend money on improving lives, spend the money in-house.

April 4, 2016

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