Elearnica
Business Horizons (2008) 51, 535—540
www.elsevier.com/locate/bushor
EXECUTIVE DIGEST
Corporate social responsibility, corporate governance, and financial performance:
Lessons from finance
Robert Neal, Philip L. Cochran *
Kelley School of Business, Indiana University, 801 West Michigan Street, Indianapolis, IN 46202-5151, U.S.A.
1. Just how influential is corporate social responsibility?
What can management and, in particular, business ethics learn from recent research in finance? One of the problems with much of modern scholarship is that there is often little communication between various ‘‘academic silos.’’ The authors of this article have reviewed a range of recent studies published in the finance field. These studies suggest that firms practicing good ethics and good corporate governance are rewarded by the financial markets, while firms practicing poor ethics and poor corporate governance are punished.
Corporate social responsibility (CSR) looks at how firms treat their stakeholders. One key stakeholder group that is frequently overlooked is the firm’s shareholders. All too often, the corporate social responsibility literature focuses on customers, employees, and the natural environment, but rarely on shareholders. The focus of this article is the impact of the firm on its shareholders as expressed through its corporate governance practices. If a firm can’t treat its shareholders well, what hope is there for the other stakeholders? Herein, we argue that there are market forces at work which reinforce good CSR
* Corresponding author.
E-mail addresses: skyking@iupui.edu (R. Neal), plcochra@iupui.edu (P.L. Cochran).
behavior. A natural starting point is to examine the lessons from one of the most prominent bankruptcies in U.S. history.
1.1. Lessons from Enron
In addition to being the largest bankruptcy in American corporate history, Enron is also a prime example of corporate social irresponsibility. In particular,
Enron provides one of America’s most
www.elsevier.com/locate/bushor
EXECUTIVE DIGEST
Corporate social responsibility, corporate governance, and financial performance:
Lessons from finance
Robert Neal, Philip L. Cochran *
Kelley School of Business, Indiana University, 801 West Michigan Street, Indianapolis, IN 46202-5151, U.S.A.
1. Just how influential is corporate social responsibility?
What can management and, in particular, business ethics learn from recent research in finance? One of the problems with much of modern scholarship is that there is often little communication between various ‘‘academic silos.’’ The authors of this article have reviewed a range of recent studies published in the finance field. These studies suggest that firms practicing good ethics and good corporate governance are rewarded by the financial markets, while firms practicing poor ethics and poor corporate governance are punished.
Corporate social responsibility (CSR) looks at how firms treat their stakeholders. One key stakeholder group that is frequently overlooked is the firm’s shareholders. All too often, the corporate social responsibility literature focuses on customers, employees, and the natural environment, but rarely on shareholders. The focus of this article is the impact of the firm on its shareholders as expressed through its corporate governance practices. If a firm can’t treat its shareholders well, what hope is there for the other stakeholders? Herein, we argue that there are market forces at work which reinforce good CSR
* Corresponding author.
E-mail addresses: skyking@iupui.edu (R. Neal), plcochra@iupui.edu (P.L. Cochran).
behavior. A natural starting point is to examine the lessons from one of the most prominent bankruptcies in U.S. history.
1.1. Lessons from Enron
In addition to being the largest bankruptcy in American corporate history, Enron is also a prime example of corporate social irresponsibility. In particular,
Enron provides one of America’s most
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