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?
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
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