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Saturday, April 21, 2012

Does Good Corporate Citizenship Pay Off?

Does good corporate citizenship pay off? Possibly. A recent study by Robert G. Eccles, Ioannis Ioannou and George Serafeim (“The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance") found that
"there is significant variation in future accounting and stock market performance across the two groups of firms. We track corporate performance for 18 years and find that sustainable firms outperform traditional firms in terms of both stock market and accounting performance."
It is possible that the causal arrow runs the other direction, however. Companies that perform well may be more likely to be good corporate citizens, perhaps because they can afford to. In other words, struggling companies can't afford the extra costs of being good citizens. Still, I'm hoping the causal arrow runs from responsibility to bottom line. I'm sure future research will tease this relationship out in more detail.

You can read (and listen) to more about this at the latest Freakonomics podcast and companion blog post ("Is Good Corporate Citizenship Also Good for the Bottom Line?"). The podcast is rather short (5 minutes) because it was produced for a segment of the NPR news magazine "Market Place," so the blog post actually contains more information and interviews.

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