Do socially responsible firms walk the talk?

Aneesh Raghunandan and Shiva Rajgopal

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Some firms claim to be socially responsible. We confront these claims with data based on the most notable recent proclamation, the Business Roundtable’s 2019 “Statement on the Purpose of a Corporation.” The influential Business Roundtable contains many of America’s largest firms; the statement proclaimed a corporation’s purpose as delivering value to all stakeholders, rather than only shareholders. However, we find no evidence that signatories—who voluntarily signed—engaged in such stakeholder-centric practices before or after signing. Relative to peers, signatories violate environmental and labor laws more frequently, have higher carbon emissions, rely more on government subsidies, and are more likely to disagree with proxy recommendations on shareholders’ proposals. We also do not observe postsigning improvements along these dimensions, which suggests that the statement was not a credible commitment to improve. Our results suggest that firms’ proclamations of stakeholder-centric behavior are not backed up by hard data.

Keywords: social responsibility; ESG; business roundtable; environmental and labor laws; violation tracker; carbon emissions (search for similar items in EconPapers)
JEL-codes: G23 G34 M14 (search for similar items in EconPapers)
Date: 2024-11-30
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Published in Journal of Law and Economics, 30, November, 2024, 67(4). ISSN: 0022-2186

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