Using Corporate Social Responsibility as Insurance ...

Using Corporate Social Responsibility as Insurance for Financial Performance

John Peloza

We know, for instance, that we have to measure results. We also know that with the exception of business, we do not know how to measure results in most organizations. —Peter Drucker, The Age of Discontinuity

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n 1936, the tax law in the United States was changed to allow firms to dedua charitable donations. In order to make deductions, however, firms needed to establish that the donations provided a direct benefit to the profit-making interests of the firm. Over the past 70 years, charitable contributions by firms have become much broader in nature, with managers justifying them on the basis that social initiatives improve the environment in which firms operate. For example, a donation to a school is justified on the basis that it improves the quality of the future workforce employed by the firm.^ Although corporate support for social initiatives has recently leveled off, corporate support remains significant with over $9 billion being donated in 2003 to charities in the U.S. alone.^ Further, some businesses have moved from traditional arm's-length relationships with charities to structures that resemble joint ventures or partnerships.^ As businesses have increased their contributions to and engagement with NGOs, the measurement challenges associated with these initiatives have also grown. Meanwhile, accurate measurement of the business benefits received from the support of social causes has taken on additional importance as managers face pressure to justify the allocation of scarce firm resources. Indeed, decision making concerning social initiatives has become much more strategic and focused on providing tangible returns to the firm.** The author vôuld like to thank two anonymous reviewers, as well as Alain Verbeke, Derek N. Hassay, and Simon Hudson for their insights and suggestions on the ideas presented in this article.

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jponsibility as Insurance for Financial Performance

The pressures to position corporate social responsibility (CSR) as enlightened self-interest have created a wealth of empirical research examining the relationship between CSR and corporate financial performance (CFP). Some researchers have cast CSR as being in conflia with CFP, while others cast CSR as complementary to economic objectives. An important yet underemphasized benefit from CSR is insurance against negative events that would otherwise harm financial performance. Although previous researchers conceptualized CSR as a form of "operating license/' or simply the actions of the firm that conform to social norms, the potential for CSR to act as an insurance policy that can mitigate the effects of negative events has been explored to a much lesser degree than incremental benefits such as heightened purchase intentions, increased sales, enhanced image, and improved employee morale.^ More importantly, the examination of the relationship between CSR and CFP has not included both the incremental benefits of CSR and the potential for CSR to mitigate harm from negative events. Although CSR is often defined broadly to include a range of both positive and negative activities on the part of the firm in areas as diverse as labor relations, adherence to environmental standards and human rights issues,^ this article specifically examines CSR as corporate financial and in-kind support for charities and social causes. This is appropriate because corporate support for charity is often expected to deliver financial returns as well as social returns, and also used to define the social agenda of the firm.'^

The Relationship between Corporate Social Responsibility and Corporate Financial Performance Smith outlined the dangers of "do-gooding executives"—those managers who justify CSR simply on the basis that it is morally defensible.^ Critics have long argued that firm investments in socially responsible but unprofitable ventures will ultimately lead to the demise of the firm at worst and, at best, lead to unsustainable support for nonprofit organizations. Further, Murray and Montanari state: "the failure to supplement the moral justification for social responsibility with economic considerations may be why many corporate executives view social responsiveness as a strictly 'nonproduaive cost'."^ Such criticisms have caused managers to develop more strategic forms of social responsibility that can be shown to deliver a financial return ^ ^, o . .,- ^^ v i ^ ^ ^ ^ ^^ to the firm—mitiatives positioned as

john Peloza, presently at the University of Calgary, will join Simon Fraser University as an Assistant Professor in the Fall of 2006. a

enlightened self-interest. Indeed, managers report increasing professionalization of their support of social causes, particularly for large firms.'" This movement to justify CSR has also led to volumes of research over the past 30 years examining the relationship between CSR and CFP. This research has sought to answer the question: Does CSR complement or conflict with economic objectives? Each of these perspectives is considered in Figure 1.

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FIGURE I.

Four Perspectives on the Relationship between CSR and CFP

Long-T

Short- Term

In Figure 1, the horizontal axis depicts the conflicting points of view over the ability of CSR to contribute to the economic goals of the firm. To the extreme left are the opponents of CSR Relationship between who argue that any social investments CSR and CFP by the firm are diametrically opposed Conflicting Complementary to the firms' profit-maximizing objective, and to the extreme right are 2 1 proponents of CSR as a means of supo X .2 > N porting the economic goals of the firm. O The vertical axis makes a distinction X £ 3 4 between long-term managerial perspectives on CSR (i.e., adopting a longitudinal approach to evaluating the impact of social initiatives) and the static, cross-sectional perspeaives that focus more on immediate impacts or do not explicitly consider the time dimension as a relevant managerial parameter. Although corporate support for social initiatives is widespread, there remains debate over whether or not corporate engagement in CSR returns a financial benefit to the firm. Familiar arguments often used against CSR are located in quadrant 1 of Figure 1. Margolis and Walsh outlined three major categories of these objections to CSR on the basis that it conflias with corporate economic goals.^' First, opponents of CSR programs argue that firms benefit society most when they focus solely on creating shareholder value. Second, Friedman and others have argued that individual shareholders are best suited to make decisions concerning social investments, and that firms should focus on maximizing profits and returning them in the form of dividends to shareholders. Finally, many shareholders are simply unaware of the sodal initiatives being undertaken by the firm, or may have not been given the opportunity to explicitly agree to such strategies. Thus, it may be more efficient for governments to simply tax firms and provide the resources to agencies that are competent in their respective fields. Margolis and Walsh summarize the arguments that CSR conflicts with economic objectives as one of two types: Either the firm misappropriates the investment away from rightful claimants, such as shareholders, or the firm mlsallocates resources because they are simply unable to make wise decisions concerning social initiatives that are outside their core competencies. In contrast, much of the "win-win" literature examining CSR can be located in quadrant 2 of Figure 1, where it is argued that CSR can complement the firms' economic objectives. Firms with this perspective will invest in social initiatives because they believe that such investments will result in increased profitability. Studies finding a positive correlation between CSR and CFP are located in this quadrant.

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These studies have taken one of two forms. First, a measure of positive CSR (e.g., voluntary implementation of environmental controls) is paired with a measure of firm performance, such as stock price. Alternatively, some negative form of CSR (e.g., an oil spill) is also paired with a measure of financial performance. In either case, researchers have established generally positive relationships between CSR and CFP. For example, negative CSR has been associated with negative impacts on share price up to one standard deviation in magnitude.'^ A recent meta-analysis and review of the studies examining positive CSR over the past 30 years found a generally positive relationship between CSR and CFP'' The majority of researchers in this area have taken a relatively short-term view of the time horizon in which CSR can complement the economic objectives of the firm. Many of the financial measures are taken in the same year, or the year immediately following the positive or negative CSR. This focus is not unexpeaed given the impatience of capital markets and their focus on short-term economic performance. Former Chrysler CEO Bob Eaton, in consideration of institutional investors, remarked: "Institutions have one central goal, and that's to get consistent, year-in and year-out returns from the companies in their portfolios. They need these returns because their individual shareholders do follow the old Wall Street rule: "If they're not satisfied, they sell."^'* The short-term thinking around CSR is also exhibited by many managers responsible for deployment of their firms' resources in social initiatives. For example, the findings of Werbel and Wortman suggest that firms use corporate investments in social causes primarily as short-term strategy to remedy negative media coverage.'^ Thus, managers appear to be exhibiting their support for social initiatives in a haphazard, refiexive response to short-term challenges. Several researchers have recently begun to extend the time horizon with which they consider the ability for CSR to affect CFP. In quadrant 3, for example, would be Stavins, who argued that although the impact of environmental regulations on financial performance would be limited, there would be a longterm effect in the form of a produaivity slowdown.'^ Similarly, some researchers have noted that when a firm engages in socially responsible behavior, the aaivity wiU eventually be matched by competitors. Indeed, previous researchers have found that peer pressure is an important factor for firms donating funds to social causes.'^ The result is a vicious cycle in which firms continue to invest socially to match competitors' investments, with a subsequent increased cost base and lower profitability for all firms in an industry.^® In addition, some authors have taken the perspeaive that CSR is very much like a tax or a license for doing business. In a recent survey of consumer attitudes toward the social responsibilities of global firms, one respondent noted: "McDonald's pays back locally, but it's their duty. They are making so much money, they should be giving back."'^ These perspeaives provide support for previous researchers who have argued that CSR is not a discretionary expense, but a necessary cost of running the business.^"

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More recently, prominent researchers have considered CSR as complementary to CFP with a long-term perspective (quadrant 4). Porter and Kramer, for example, argue against the two implidt assumptions in the arguments that CSR conflicts with economic goals. First, they argue that social and economic objectives need not be separate and distina. Indeed, in a 1952 landmark court case the New Jersey Supreme Court provided support for an East Coast firm's decision to donate to Princeton University on the grounds that it improved the social climate in which the firm operates.^^ The second assumption in the argument that CSR conflicts with economic goals is that the aggregate impact of individual donors (i.e., shareholders, employees) is equal to the impact of a firmsponsored initiative. They offer the example of the Cisco Networking Academy as an example of a complementary, long-term perspective on CSR that breaks this assumption. In this program, Cisco leverages its core competendes and employee expertise to deliver network training through the local educational system, and now offers a web-based certification in network administration to high school and post-secondary students. In coordinating such a program, Cisco is able to align its economic and social goals by ensuring a future supply of welltrained employees. More importantly, Cisco is able to create an impaa larger than that of individual shareholders or employees making contributions on their own. The example of Cisco is reinforced by the work of Berger, Cunningham, and Drumwright who examined, in great depth, eleven firm/cause partnerships.^^ Their findings suggest that successful, long-standing alliances between firms and non-profits are characterized by a long-term focus and at least one non-economic objective. Another way in which long-term complementarity between CSR and CFP has been established is in the ability of firms to acquire resources that can serve as sources of competitive advantage. For example, participation in CSR can lead to benefits such as a developed process of moral dedsion making and the capacity to develop responsive, mutually beneficial relationships across a range of stakeholders.^^ A third way in which researchers have taken a longer-term perspective on the complementary impaa of CSR on CFP is the consideration of reputation effects. Previous researchers have concluded that social responsibility is a major signal used by firms to create good reputations,^'* and McWilliams and Siegel pointed out that positive CSR "creates a reputation that a firm is reliable and honest.""^^ Similarly, Bhattacharya and Sen argue that CSR builds a reservoir of goodwill that firms can draw upon in times of crisis/^ Positive reputations have often been linked to positive financial returns, with their value tied inherently to the inability of competitors to imitate the reputation. The value of a positive reputation is "precisely because the development of a good reputation takes considerable time and depends on a firm making stable and consistent investments over time."^^ Therefore, reputation is arguably the most valuable asset of any firm as thus worth protecting. The ability, over the long term, for CSR to provide value to the firm is critical to managers who seek to justify investments on the basis of enlightened

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self-interest. However, the ability for firms to realize complementary value is based not only on the potential for incremental gain (e.g., increased sales, enhanced image), but also on the potential for the CSR to a a as a buffer against unforeseen negative events.

Leveraging Corporate Social Responsibility for Economic Benefit In their assessment of the extent to which CSR conflicts or complements CFP, previous researchers have almost implicitly assumed that the value in CSR is in the form of incremental gains for the firm. For example, researchers often use the term investment when describing corporate support for social causes, F I G U R E 2. The Impact of CSR on CFP and the forms of return on investment to the firm studied have included the ability to increase prices, enhanced Relationship between image, and increased ability to recruit CSR and CFP and retain employees. Further, FomIncremental Risk Mitigation/ brun, Gardberg, and Barnett compare Gain Insurance CSR investments to investments made in R&-D or employee training in that 1 3 they can unlock future growth potential for the firm.^^ However, many firms report virtually no audit proce2 4 OO dures to determine if their investments Qj o. are aaually paying dividends back to the firm, and researchers have found that the opportunity to promote their business is not a major faaor for managers deciding which charitable organization to support.^^ These findings suggest benefits to the firm in addition to those concerning incremental gain. One additional benefit—risk mitigation—is considered in Figure 2. In Figure 2 the horizontal axis considers the manner in which researchers view the means by which CSR influences CFR On the left side of the axis are those that consider the benefits from CSR to be in the form of incremental gains. In other words, CSR represents an opportunity for the firm to improve its financial performance. The right side of the axis considers the ability for CSR to mitigate potential financial harm from events such as produa recalls. In other words, CSR offers firms the ability to withstand threats and maintain financial performance. The vertical axis assesses the leveraging potential of CSR in terms of positively affeaing financial performance (weak or highly uncertain versus strong). On this axis the issue is whether the CSR may improve or generate competencies and capabilities that can be deployed to obtain competitive advantage.

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Firms engaged in unfocused or undisciplined CSR present a quadrant 1 scenario. In these situations, the firm doesn't meaningfully integrate a social initiative into its culture and typically has relationships with dozens or hundreds of NGOs. Firms in this scenario may suffer from the "executive spouse syndrome" in which the leader of the firm chooses social initiatives based on personal interest instead of the interests of the firm. Instead of the cause being chosen because of its relevance to the firm's business strategy, the cause is chosen based on what will satisfy personal motives. Recent studies exploring institutional effects on firm activities suggest that firms may in faa be moving further into this quadrant. For example, several researchers have found that firms undertake certain human resources practices in order to gain legitimacy, essentially following the market leader or to be ahead of legislation. Specific to CSR, Galaskiewicz found that institutional forces—the other local firms and mangers' personal networks—have a marked effect on firm initiatives.^° In addition, firms that practice CSR only to the level required by law would be considered a quadrant 1 scenario. An example of this is the situation in which Nike found itself in the mid-1990s. The firm faced scandal for the labor practices of its suppliers in Southeast Asia. Although the firm was technically in compliance with the law because it outsourced the work to other firms, consumers and other stakeholders pressured the company to make changes. The firm was in what Zadek called the defensive stage of CSR.^^ Their response was simply "it's not our job to fix the problem," and they suffered reputationally and financially as a result. Another example of a firm that has been unable to leverage its positive CSR for either gain or risk mitigation is BP. Although the firm widely touts its concern for the environment, to the extent that it even changed its name from British Petroleum to Beyond Petroleum, critics charge that this CSR is merely tokenism designed to greenwash stakeholders. As evidence, they point to recent investments by BP in Russia's petroleum industry that dwarf any investments the firm has made in sustainable energy development to date. In fact, Greenpeace named BP the largest "corporate climate culprit" on earth in 2004.^^ When a firm attempts to promote what stakeholders view as superficial CSR, the positive action can turn negative. Although many consumers find it acceptable for a firm to derive some benefit from their CSR activities, and the inclusion of cause-marketing messages in advertising is generally seen as beneficial to the firm, researchers caution that this type of promotion requires great care." Attempting to capitalize on good deeds by promoting them has backfired on some firms who have spent more on promoting their actions than they spent on the action itself.^** Therefore the ability of the firm to meaningfully engage stakeholders as part of the CSR process is essential to their ability to leverage it for economic benefits. In quadrant 2, then, are scenarios in which firms have been able to leverage their CSR for financial gain. When firms increase their level of involvement and integration with social causes or NGOs, with employee volunteers for example, stakeholders are likely to view the action more positively than if the firms

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makes only a cash donation. Hess and colleagues argue that shareholders and customers are less likely to view the activity as self-serving.^^ Further, they assert that when the firm makes a direct contribution of expertise, conflict of interest issues are reduced since the firm may have unique abilities to provide support. Austin outlined a collaboration continuum between firms and nonprofits consisting of three stages.^^ The first stage is philanthropic and is exemplified by unfocused monetary support. Some firms have moved to the next or transactional stage of collaboration, where donations are focused around specific actiyities (e.g., a percentage of every sale) or events. The final, and ideal, stage in Austin's continuum is integrative, where the collaboration includes shared employees and activities, a relationship that approximates a joint venture. An example of a firm building an integrative program and thus a strong ability to leverage its support of social initiatives is the partnership between Home Depot and KABOOM! KABOOM! is a non-profit organization that builds playgrounds in inner cities across the United States. In addition to financial support. Home Depot brings employee volunteers and products to the relationship, as well as access to the firm's accounting and legal staff. In addition, the program is decentralized allowing each local store to develop close relationships with KABOOM! on a local level to ensure further integration. Although improved public relations is part of the payback for Home Depot, the firm benefits in other ways. Because employees can be directly involved and use their expertise in a hands-on manner, the firm benefits from improved morale and commitment.^^ In quadrant 3 of Figure 2 researchers have recently begun to explore the ability for CSR to provide an additional form of value to the firm in the form of risk mitigation. These two forms of financial return—a positive incremental gain as a reward for positive behavior and a mitigation of consequences from negative firm behaviors—have been called "opportunities" and "safety nets."^® These are not merely two sides of the same coin. For example, incremental benefit can be secured from customers in the form of increased loyalty or positive word of mouth. Customers can also take negative action and defect to a competitors' product or engage in negative word of mouth. However, a customer who does not engage in one set of behaviors will not necessarily engage in the other set of behaviors. Although the insurance value from CSR has not yet been considered in the formal evaluation of the CSR/CFP relationship, the potential for CSR to provide risk mitigation is a widely accepted benefit of such activities. For example, Knox and Maklan state: "being trusted by stakeholders and pursuing socially responsible policies reduces risks arising from safety issues, potential boycotts and loss of corporate reputation."'^ It has also been argued that executives have an obligation to take into account the effect of a potentially tarnished image that might result in lost sales or the reduction of benefits from other stakeholders such as governments. Dunfee, for example, argues that managers not only have a duty to maximize shareholder value but to also anticipate changing marketplace morality given their potentially devastating impact on shareholder value.'^° Indeed, previous research reporting on a series of corporate social

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responsibility audits revealed that in addition to the expeaed gains such as employee morale, the audited firms consistently lowered legal exposure and other risks to company reputation.'*' Klein and Dawar empirically examined the potential for CSR to provide insurance value and found that consumer perceptions of a firms' CSR moderated their attributions of blame on the part of the firm for a product failure.**^ They argued that CSR may have value to the firm even if it does not immediately increase profitability because it can help mitigate the effects of a damaging event. Their study extended the work of previous researchers demonstrating that consumers are more willing to punish the bad behavior of firms more than they are willing to reward their good behavior."^ Similarly, Orlitzky and Benjamin meta-analyzed the degree of firms' financial risk (including market risk measuring the volatility of historical market returns) and found that increased risk is positively associated with lower levels of CSR. Despite this potential, firms have generally been limited in their abilities to leverage their CSR for risk mitigation. For example, a recent study of corporate CSR managers found virtually no interaction between these departments and those in the firm responsible for formal risk management.**^ Thus, although researchers and firms are moving toward an appreciation of insurance potential from CSR, the certainty of firms' abilities to take advantage of this potential is limited. An example of a firm's weak ability to leverage its CSR is Denny's and the lawsuits and negative publicity it faced when it was accused of racial discrimination. Prior to the accusations, the firm's CSR policy was a loosely organized series of financial contributions to a wide range of charities and social causes. The firm had no reservoir of goodwill upon which it could draw when it faced the accusations of discrimination and suffered subsequent business losses. Recognizing the need to re-engineer the CSR program, CEO Ron Petty led an effort to develop a more focused identity-building program supporting social causes.'*^ Finally, in quadrant 4 we see firms that are able to leverage their CSR for risk mitigation benefits. Bhattacharya and Sen referred to the ability of some firms to gain the benefit of the doubt with consumers as resilience.'^^ They argued that consumers are more likely to forgive negative CSR on the part of firms when they have long-standing reputations for their positive CSR. Further, the value of a strong reputation for CSR may provide value to the firm even if the negative event is outside the normal operations of the firm. During the 1992 riots in Los Angeles, McDonald's restaurants were largely spared by vandals and looters, a result that the firm credits to its proactive efforts to develop rich relationships with the community through its development of employment opportunities and other efforts such as Ronald McDonald House.'*^ The ability for firms to gain benefit of the doubt from stakeholders is illustrated by another experience of McDonald's in the UK. The firm was one of many firms targeted by animal rights activists concerned about the treatment and use of animals in the firm's produas. Relying on its reservoir of goodwill based on positive CSR, the firm was able to take the time to develop a formal

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policy on the issue. Although the firm was still compelled to act, had the firm not had a positive reputation built on CSR, it would not have faced pressure to a a more quickly.'*^ CSR, then, provides the firm with an ability to gain economically in two distinct ways—incremental benefits such as increased sales and potential mitigation of harmful events.

The Impact of Insurance Value on the CSR/CFP Relationship Previous studies have primarily used one of two methods for establishing the CSR/CFP relationship. First, researchers have examined the correlation between the level of investment in CSR and some measure of CFP. For example, many studies have operationalized CSR using the KLD database that measures firms' social investment across a number of criteria such as community investment, treatment of the environment, and quality of products and services. In these studies, the CSR is typically assumed to be a level of positive firm behavior. These measures of CSR are then matched with some accounting measure of CFP, such as share price. However, the measures of financial performance are often limiting. For example, each of the categories of financial performance measures outlined by Griffin and Mahon—profitability, asset utilization, growth, liquidity, and risk/market measures—corresponds to incremental financial gain.**^ Similarly, Orlitzky et al. classified the three major types of measures as market-based (investor returns), accounting-based (accounting returns), and perceptual measures (e.g., surveys capturing subjective estimates of a firms' financial position), and none of these measures capture the financial benefit received from the mitigation of some negative event.^"^ Further, previous researchers have shown that qualitative ratings of corporate reputation are almost entirely driven by financial performance, and that elements of reputation such as CSR are virtually indistinguishable from financial performance.^' The second method that has been used to quantify the relationship between CSR and CFP is to examine some financial index of performance, such as stock price, both before and after some negative event related to socially responsible behavior. However, if the firm has no negative event where CSR can act to mitigate harm, the firm receives no insurance benefit from their investments. Similar to any insurance policy, if no claim is made, the cost of the policy is simply expensed and the firm appears less profitable than it would have had no such policy been purchased. Therefore, by not accounting for the potential value of the insurance gained from CSR, those firms that invest in such activities may appear less profitable than those that do not. Even arguments that investments in CSR create a favorable business environment and therefore lift the performance of all firms fail to capture the insurance value, since firms that do not incur such expenses (i.e., free riders) will appear more profitable than those that do not. Smith considered both positive and negative forms of CSR in his discussion of consumer boycotts." Indeed, these two different views of CSR—one that

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focuses on the positive aspects of firm behavior and the other that focuses on the negative—have lived almost exclusively in two separate camps throughout the decades-long debate over the CSR/CFP relationship. This distinction is evident in Frooman's meta-analysis of socially irresponsible and illegal firm behavior and its relationship to share price." The meta-analysis specifically excluded two studies that involved firms choosing to withdraw from South Africa during the Apartheid era, generally considered a form of positive CSR. Although his analysis underscored the importance of event studies in the examination of the CSR/CFP relationship, he did not evaluate the effects of positive behavior (i.e., a reservoir of goodwill) prior to the negative event. Although previous researchers have called for a level of investment that optimizes the value to the firm using costbenefit analyses, previous studies have not taken into account the total benefit of CSR, including both incremental gain and the moderating effect of CSR on negative firm behavior. Protection against the damaging effects of negative CSR is even more important with greater media scrutiny and coverage, and the use of rapid and widespread communication vehicles such as the Internet by activist groups such as Greenpeace. Further, as markets have become more competitive, CSR has become an even more important source of differentiation for firms. Dawkins and Lewis found that over half the population in their sample ranked forms of corporate responsibility such as community commitment as the most important factor in forming an impression of a firm.^"^ Further, the value of CSR to the firm may be in an event that doesn't occur. For example, researchers have argued that by acting in a positive manner, the firm (and indeed the whole industry) may benefit by avoiding government legislation that would impose restrictions or otherwise change the business environment in which the firm operates. ^^ Thus, in addition to bolstering attempts to infiuence existing government legislation, CSR can act to suppress potential legislation. In the latter scenario, despite the potential for some free riders, CSR is clearly financially beneficial to the firm but such value would not be evident in traditional measures of the CSR/CFP relationship. The cost to the market capitalization of the firm from the damage to their reputation is typically much greater than the hard costs incurred from the actual event itself, such as a product recall.^^ Indeed, Frooman found a significant effect of negative firm behavior on return to shareholder equity—almost one full standard deviation below the normal return.^^ Similarly, Blacconiere and his colleagues, across a number of studies, found a markedly lower reduction in market value for firms that are proaaive in their environmental reporting.^* Therefore, mitigating the reputational effects from such events can provide tremendous benefit to the firm. The insurance benefits received by firms in the form of reputational capital could actually be greater than the incremental gains expeaed from CSR, since a negative event is more likely than a lack of positive behavior to affect the financial performance of the firm.^^ Therefore, any measure of the CSR/CFP relationship that doesn't take into account some measure

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of the insurance value of CSR received by firms may understate the value of the CSR investment by a significant margin. Although the value from CSR has not been examined holistically to include both the incremental gain and latent insurance value, several researchers interested in the insurance value have been able to quantify its value. For example, in the study referenced earlier, Klein and Dawar found that consumers are more willing to forgive if they perceived a firm's positive CSR as a signal of its conscientiousness. Because the study was done in an experimental setting with a fiaitious firm, the researchers were able to clearly demonstrate the insurance value of positive CSR in mitigating harm from a negative product recall. When consumers were exposed to a situation in which a firm had a positive reputation for CSR, purchase intentions toward the firm were twice as high as those of consumers who were exposed to a firm with a reputation for negative CSR. Using actual market data, Blacconiere and Patten examined the insurance value from a positive CSR reputation specific to the chemical industry. This study is important because it isolates firms from a specific industry. The study included 47 firms with chemical operations and measured the effeas of the Union Carbide Bhopal disaster on the firms' stock price in the days immediately following the disaster. As expected, they found that a higher level of CSR disclosure in the period prior to the disaster was a significant predictor of less-severe declines in stock price. Essentially, managers that are proactive in their disclosure of CSR activities can expect to see a significant moderation in the damage to their firms' stock price relative to other firms within the industry. Finally, a recent study examined the effects of the 1999 riots surrounding the WTO meetings in Seattle. Researchers included over 400 firms across a cross section of firms in their study and found two results pertinent to the concept of CSR as insurance. First, they found that there is a marked industry effect where firms in industries with reputations for negative CSR (e.g., environmental damage) suffered incrementally over firms from more neutral industries. Second, they found that the positive benefits from CSR insurance are evident once the industry effect has been removed. Specifically, firms without a positive reputation for CSR suffered stock market declines twice the size of those experienced by firms with a reputation for positive CSR. These studies demonstrate the potential for CSR to deliver not only incremental benefits in the form of increased sales or premium prices, but the ability for firms to maintain sales and pricing levels in times of crisis.

Determining the Need and Type of Insurance from CSR The most important questions for managers seeking insurance value from their firms' CSR are: How can managers determine the need for insurance value fromvCSR? How firms can capitalize on the potential for CSR to provide insurance for finandal performance?

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The Need For Insurance The need for firms to rely on the insurance value from CSR is affected by both the industry in which the firm operates and the age of the firm. Industry When assessing their CSR investments, managers should recognize that the insurance value of CSR will vary across industries and firms. For example. Miles highlighted the concept of "business exposure," the degree to which a firm is vulnerable to its environment.^° Firms that are under greater scrutiny from a broader range of stakeholders face greater business exposure. Indeed, previous research has shown that a firm's support for charities and social causes is highly correlated to the level of business exposure it faces.^' Similarly, Smith argued that reputational risk is more of a concern for consumer goods firms that have a larger exposure to consumer boycotts or negative media exposure." However, he also highlights reputational risk for business-to-business firms who face pressures from other stakeholders such as distribution channel members or government legislation, suggesting a "baseline" of necessary insurance across all industries. The effect of industry is apparent in a recent KPMG report summarizing CSR reporting by over 1,600 firms around the world. The report points out that those industrial sectors with relatively high environmental impact, such as utilities and oil and gas companies, lead all other firms in CSR reporting. Interestingly, they also note a marked increase in the CSR reporting by firms in the financial sector, no doubt a reaction to recent scandals in the sector.^^ Firm-specific variables will also exacerbate the need for reputational insurance. For example, firms that operate in certain geographic locations face greater potential for significant negative events to occur. Also, those firms that are in inherently higher risk categories, such as firms that work in environmentally sensitive areas, are more likely to require this form of insurance than firms that operate in more stable industries, or industries where the potential costs of harmful events are less severe. Individual managers must assess the risk of their firm/industry and make investments in insurance accordingly. Of course, there is also the potential for a reciprocal relationship between the level of risk a firm will accept from its business operations and the level of its CSR investment. Managers who feel their firm's reputation for CSR provides insurance coverage are more likely to take on additional risk when seeking financial performance. Firm Age The recognition and valuation of CSR as a form of insurance offers insight into the cause-and-effea relationship between CSR and CFP. Although some recent research has established a "virtuous circle" between CFP and CSR,^"* questions remain about whether a firm "does well by doing good" or that it "does good by doing well." When CSR is viewed partially as insurance, it adds another dimension to the virtuous circle by suggesting that the direaion is dependent upon the life cycle of the firm.

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For example, in the developmental stages, firms use CSR primarily for incremental gain. Because younger firms have less reputational capital to protect (although CSR aaivity will play a role in developing such capital), the primary benefit to the firm is in the form of incremental gain such as differentiation among its competitors. Such benefit is expected to lead to financial performance. However, after doing well financially, the firm invests in proteaing its reputation. Engaging in this protection ensures that the firm can continue to thrive in the future, which creates additional CSR activity. Therefore, reputation initially plays a mediating role between CSR and CFP, and later justifies investments in CSR in order to maintain CFP. Thus, CSR moves from an objective of aeating value to an objective of protecting value. Therefore, younger firms simply have less need to rely on the insurance aspects of CSR and can focus on leveraging their efforts for promotional gain. Maximizing The Insurance Value From CSR There are three variables that affect the ability of CSR to act as a form of insurance: the level of effort and commitment of the firm, how the firm promotes its CSR, and the relationship between CSR and the core business of the firm.

Effort/Commitment Several researchers have highlighted the need for firms to do more than simply make a donation by actively encouraging employee volunteering and the commitment of non-financial company resources. In addition, previous researchers have argued that firms must engage in longer-term relationships with their nonprofit partners in order to make not only social impaa, but economic impact as well. Researcher Pam Ellen and her colleagues, for example, show that consumers purchase intentions increase when a firm is seen as exerting more effort and being more committed to a sodal cause.^^ The same benefits would accrue to firms looking to protea against negative events. Consumers and other stakeholders who view a firm as more committed to and exerting more effort toward social causes wili be more likely to forgive these altruistic firms.^^ The Denny's example mentioned earlier provides an excellent example of how an unfocused and uncommitted approach to CSR did not provide protection. Prior to the racism allegations in 1991, the firm engaged in a series of short-term, one-off engagements with social causes. Therefore the public had no reason to believe that Denny's was serious in its efforts to be a responsible corporate citizen. The Nike example also provides an example of how limited commitment and effort in its CSR did not translate into insurance for the firm, because the firm did only the bare minimum to comply with standards. Promotion of Positive CSR Another variable affeaing the ability of CSR to protea a firm is how the firm promotes its "good deeds," or more importantly how the firm seeks to take

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credit for its efforts. Research suggests that the optimal strategy for building the reservoir of goodwill is corporate modesty. For example, Himmelstein interviewed dozens of managers responsible for support of charities and social causes by many of the world's leading brands, including Citibank, General Mills, 3M, General Flectric, and American Fxpress.^^ He found that managers value "discrete" forms of support for social causes; the most important audience for the CSR are the NGOs and other groups in partnership with the firm. The benefit of having these groups on the side of a firm is twofold. First, by integrating with the NGO, the firm can utilize their advice and expertise to make better decisions. Secondly, when negative CSR by the firm is made public, the NGO can come to the defense of the firm and "give permission" for stakeholders to forgive. This approach is supported by previous research demonstrating that overt self-promotion is less likely to serve as protection against negative events as third-party endorsements.^^ External stakeholders such as activist groups should be engaged as partners in pro-social behavior, thereby reducing the need for any form of promotion to that stakeholder group. In their annual reputation review, the Wall Street Journal presented the attitudes of a consumer who gave McDonald's credit for their support of the New York 9/11 rescue operations specifically because they were discrete in their promotion of the effort. Since promotion of CSR aaivities can backfire on the firm, understated promotion may be the best option. In addition, when a firm engages a social cause across a number of contact points—such as employee volunteer programs, access to other firm resources, donation of products, and advocacy support—it creates more opportunities for nonprofits to promote the partnership on behalf of the firm. Examples of how overt promotion backfires on a firm are evident in the attempts at positive CSR by tobacco giant Philip Morris. The firm has been criticized for spending more on promoting its support of charity than it actually donates, as well as criticized for its attempts to air its own anti-smoking campaigns. In fact, critics argue that the campaign aired by the firm only encourages teens to smoke.^^ Unsurprisingly, the promotional strategy of the firm has severely limited the ability of the firm to create a reservoir of goodwill. Relationship to Core Business Researchers have examined the extent to which firm/cause fit affects the social initiative, with the majority of authors concluding that firms should support causes that have some relevance to their core strategy. Although the findings are somewhat mixed, alignment sends a signal that the involvement is at least partially motivated by altruism.^^^ Although consumers are willing to support a firms' CSR if they view it as partially self-serving, perceived altruistic intentions are better able to protect a firm from harm because stakeholders are willing to give the benefit of the doubt. When a firm seeks out social causes with a high degree of fit with its core business, it will also gain exposure to key stakeholders such as activist groups. This provides the opportunity to enter into a meaningful dialogue with groups

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that are most likely to either endorse or criticize the actions of the firm. Further, when a firm engages a social cause with a high degree of fit, it is able to engage a wider variety of stakeholders in the initiative. For example. Home Depot in its support for KABOOM! is able to engage thousands of its retail associates and even its suppliers. This helps to widen the network of stakeholders involved and reduces the need for overt promotion of the programs.

Insurance or Hypocrisy? While attempting to implement CSR initiatives, many managers have faced charges of hypocrisy from critics. For example, BP faced harsh criticism as it touted its environment-friendly forays into sustainable energy and Philip Morris was criticized in the business and popular press for not being sincere in its efforts to help curb teenage smoking. These issues are faced by managers whether they view CSR as a means to improve financial performance or as a means to insure it. However, in the face of negative events managers need to consider how the negative event itself and their reaction to it, along with their industry, will influence the ability of previous positive CSR to act as a buffer. Some types of negative CSR will be more "forgivable" than others, and what has been called "greenwash" is unlikely to be effective as insurance. In the case of firms such as Enron for whom deception was systemic, stakeholders are less likely to forgive the transgression because they will view it as a deliberate act. In such cases, stakeholders will view the positive CSR as a means to hide the true intentions of the firm (incidentally, Enron was one of the largest corporate contributors in the Houston area). Similar charges have been leveled against BP. More recently, Wal-Mart came under fire for its plan to offer health insurance to its U.S. employees. Although initially praised for its efforts, a company memo surfaced in which the true motivation—to attract a healthier, more productive workforce—became clear. In perhaps the most high-profile case in recent memory, when it was reported that Merck knew about the dangerous side effects of its drug Vioxx, any public sympathy for the firm evaporated quickly. In these cases, stakeholders are likely to view the misdeeds as representative of a deepseeded culture of deceit, and thus the negative events are not insurable through previous "good deeds." However, in other cases the firm misdeed is perceived as less malicious and out of character with the normal operations of the firm and thus be a forgivable act. An example is a high-profile diesel spill at Intrawest's world-famous Whistler-Blackcomb ski resort. After the spill, advocacy groups stood by the firm and characterized the spill as an unforeseeable event in an otherwise strong record of environmental efforts. Similarly, the industry in which a firm operates will affect the ability of the firm to both gain and insure financial performance through CSR. For example, firms that are in "vice" industries such as tobacco or alcohol, or firms in industries that create pollution or deplete environmental resources are more likely to be seen as using CSR as a cover for ongoing business practices. Szykman found that "sin" industries such as alcohol and tobacco were only given the benefit of the doubt when their positive CSR didn't imply profit-driven motives. For

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example, when an alcohol company sponsors a program aimed at reducing teenage drinking (i.e., reducing product sales) versus undertaking a sustainable production praaice.^* Finally, the corporate response to a negative event is likely to shape stakeholders' perceptions and thus influence the ability of previous CSR to a a as a buffer. In the Intrawest example, the firm moved quickly to acknowledge the seriousness of the spill, and encouraged transparency between itself, advocacy groups, and the media. This stands in sharp contrast to other situations where a lack of corporate transparency can result in media speculation and the appearance of the firm being concerned more about its own interests than the interests of those affected by the event. By engaging stakeholders in a crisis, managers can signal the firm's commitment to solving the issue and can avoid providing a cue for charges of hypocrisy.

Conclusion Contrary to Drucker's confidence that business organizations can measure results, the multi-dimensional nature of the CSR/CFP relationship has created tremendous difficulties in this regard. Interestingly, the first serious attempts to capture the CSR/CFP relationship came only a few years after Drucker made that claim, and the debate has been kept alive ever since.^"^ The framework presented here emphasizes the complementarity between CSR and CFP by: • providing a framework for assessing the overall impact of CSR (including the potential for it to provide both affirmative and defensive benefits to the firm); • reinfordng the long-term view of CSR; and • providing guidance for managers seeking to leverage CSR for its insurance value. The categorization of the CSR/CFP relationship should encourage managers to consider the value of CSR beyond incremental gain. Even if the firm only maintains the financial status quo, the investment in CSR can be considered a wise investment, since it would mean it is essentially gaining insurance coverage at no cost. CSR can provide incremental gain during good times and subsequent mitigation of negative publidty. Most importantly, examination of the CSR/CFP relationship that includes measures of the insurance value help provide an understanding of the optimal levels of insurance investment for firms seeking to protect their financial performance through their reputations. Attempts to accurately measure the financial return from CSR are more than an academic exercise. Many nonprofit organizations are now reliant on corporate sources of support, and without sustained support many may not have the ability to pursue their missions. The increased pressure faced by managers to justify the allocation of scarce resources means that dollars spent on CSR activities are becoming more closely scrutinized, and these dollars are at risk of being withdrawn.

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Finally, investments in CSR should not be considered by managers to be a discretionary expense. Firms insure virtually all aspects of their operations, including individual members of senior management. However, the reputation of a firm is arguably the most valuable asset, and thus an asset worth protecting. Just as the purchase of other forms of insurance is considered sound management practice, so too is the purchase of insurance for a firms reputation. Through this widening of the assessed value from the CSR investment, firms can better justify their role in society from a position of enlightened self-interest.

Notes 1. For a review of the history of corporate support of charities and social causes in America, see Peter Dobkin Hall, "Business Giving and Social Investment in the United States," in Richard Magat, ed.. Philanthropic Giving: Studies in Varieties and Goals (Oxford: Oxford University Press), pp. 221-245. 2. Carol Cone, Mark Peldman, and Alison DaSilva, "Causes and Effeas," Harvard Business Review, 81/7 (2003): 95-101. 3. James Austin, The Collaboration Challenge (San Francisco, CA: Jossey-Bass, 2000). 4. See, for example, Joshua Margolis and James Walsh, "Misery Loves Companies: Rethinking Social Initiatives by Business," Administrative Science Quarterly, 48 (2003): 268-305; N. Craig Smith, "Corporate Social Responsibility; Whether or How?" California Management Review, 45/4 (Summer 2003): 52-76. 5. Por purchase intentions, see Sankar Sen and C.B. Bhattacharya, "Does Doing Good Always Lead to Doing Better? Consumer Reactions to Corporate Social Responsibility," Journal of Marketing Research, 38/2 (May 2001): 225-243; for increased sales, see Tom Brown and Peter Dacin, "The Company and the Product: Corporate Associations and Consumer Product Responses," Journal of Marketing, 61/1 (January 1997): 68-84; for enhanced image, see Charles Pombnin and Mark Shanley, "What's in a Name? Reputation-Building and Corporate Strategy," Academy of Management Journal. 33/2 (June 1990): 233-258: for improved employee morale, see Daniel Turban and Daniel Greening, "Corporate Social Performance and Organizational Attractiveness to Prospective Employees," Academy of Management Journal, 40/3 (June 1997): 658-672. 6. Brown and Dadn [op. cil.], for example, define CSR as the organization's status and aaivities with respea to its "perceived societal obligations." 7. Although Porter and Kramer argue that CSR can be used to simultaneously achieve financial and social objectives, Vogel points out that the financial business case for CSR has become the most influential. Michael Porter and Michael Kramer, "The Competitive Advantage of Corporate Philanthropy," Han'ard Business Review, 80/12 (December 2002): 57-68; David J. Vogel, "Is There a Market Por Vinue? The Business Case for Corporate Social Responsibility," Califomia Management Review. 4714 (Summer 2005): 19-45. 8. Smith (2003), op. cit. 9. Keith Murray and John Montanari, "Strategic Management of the Socially Responsible Firm: Integrating Management and Marketing Theory," Academy of Management Review, 11 /4 (Oaober 1986): 815-827; p. 818. 10. Bennett, for example, finds that firms apply typical produa management praaices to donations to charities and social causes. Roger Bennett, "Corporate Philanthropy in the UK: Altruistic Giving or Marketing Communications Weapon?" Journal of Marketing Communications, 3 (1997): 87-109. 11. Margolis and Walsh, op. dt. 12. Jeff Prooman, "Sodally Irresponsible and Illegal Behavior and Shareholder Wealth," Business andSociety. 36/3 (1997): 221-249. 13. Marc Orlitzky, Prank Schmidt, and Sara Rynes, "Corporate Sodal and Pinandal Performance: A Meta-Analysis," Organization Studies, 24/3 (2003): 403-441; Margolis and Walsh, op. dt. 14. Robert B. Reich, "The New Meaning of Corporate Social Responsibility," Califomia Management Review, 40/2 (Winter 1998): 8-17.

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15. James D. Werbel and Max S. Wortman, "Strategic Philanthropy: Responding to Negative Portrayals of Corporate Social Responsibility," Corporate Reputation Review. 3/2 (2000): 124-136. 16. Robert N. Stavins, "The Challenge of Going Green," Harvard Business Review. 72/4 (July/August 1994): 38-39. 17. See, for example, David Hess, Nikolai Rogovsky, and Thomas Dtjnfee, "The Next Wave of Corporate Community Involvement: Corporate Social Initiatives," Califorma Management Review. 44/2 (Winter 2002): 110-125. Steve Hoeffler and Kevin Lane Keller, "Building Brand Equity Through Corporate S,oc\tia\MaT\icun%," Journal of Public Policy & Marketing. 21/1 (2002): 78-89. 18. Hess, Rogovsky, and Dunfee, op. cit. 19. Douglas B. Holt, John A. Quelch, and Earl L. Taylor, "How Global Brands Compete," Harvard Business Review, 82/9 (September 2004): 68-75. 20. There has been much discussion in the literature concerning the effect of "slack" business resources on CSR. Waddock and Graves argue that CSR should be viewed as fundamentally linked to business performance and therefore not considered discretionary. Sandra Waddock and Samuel Graves, "The Corporate Social Performance-Financial Performance Link," Strategic Management Joumal. 18/4 (April 1997): 303-319. 21. Dobkin Hall, op. cit. 22. Ida E. Berger, Peggy H. Cunningham, and Minette E. Drumwrighl, "Social Alliances: Company/Nonprofit Collaboration," California Management Revievi', 47l\ (Fall 2004): 58-90. 23. Elisabet Garriga and Domenec Mele, "Corporate Social Responsibility: Mapping the Territory," J(Jwr«fl/t?/Bw5i«e55 E//7ia 53 (2004): 51-71. 24. Ahmed Riahl-Belkaoui and Ellen L. Pavlik, Accounting for Corporate Reputation (Westport, CT: Quorum Books, 1992). 25. Abagail McWilliams and Donald Siegel, "Corporate Social Responsibility: A Theory of the Firm Perspeaive," Academy of Management Review, 26/1 (January 2001): 117-127; at p. 120. 26. CB. Bhattacharya and Sankar Sen, "Doing Better at Doing Good: When, Why, and How Consumers Respond to Corporate Social Initiatives," California Management Review. 47/1 (Fall 2004): 9-24. 27. Peter Roberts and Grahame Dowling, "Corporate Reputation and Sustained Superior Financial Performance," Strategic Management Joumal, 23/12 (December 2002): 1077-1093. 28. Charles Fombrun, Naomi Gardberg, and Michael Barnett, "Opportunity Platforms and Safety Nets: Corporate Citizenship and Reputational Risk," Business and Society Review, 105/1 (Spring 2000): 85-106. 29. Berger et al., op. cit; Michael Useem, "Corporate Philanthropy," in Walter Powell, ed.. The Nonprofit Sector: A Research Handbook (New Haven, CT: Yale University Press, 1990), pp. 340359. 30. For a discussion of institutional effeas on human resources strategy, see Peter D. Sherer and Kyungmook Lee, "Institutional Change in Large Law Firms: A Resource Dependency and Institutional Perspective," Academy of Management Journal, 43/1 (February 2002): 102-119. For a discussion specific to CSR, see: Joseph Galaskiewicz, "An Urban Grants Economy Revisited: Corporate Charitable Contributions in the Twin Cities, 1971-81, 1987-89," Administrative Science Quarterly. 42/3 (September 1997): 445-471. 31. Simon Zadek, "The Path to Corporate Responsibility," Harvard Business Review, 82/12 (December 2004): 125-132. 32. For more information see M. Sider, "BP and Corporate Greenwash," Ivey Case Study 9B05C010 (2005). See also "The Unrepentent Oilman," The Economist. March 13. 2003. 33. Jerry Dawkins and Stewart Lewis, "CSR in Stakeholder Expeaations: And Their Implication for Corporate Strategy," Joumal of Business Ethics. 44/2-3 (May 2003): 185-93; Mark Forehand and Sonya Grier, "When is Honesty the Best Policy? The Effea of Stated Company Intent on Consumer Skepticism," Joumal of Consumer Psychology. 13/3 (2003): 349-356. 34. Pitcher, for example, highlights that many firms have suffered public backlashes to the promotion of their "good deeds." George Pitcher, "Corporate Responsibility Isn't Always About Charity," Marketing Week. March 14, 2002: 33. 35. Hess, Rogovsky, and Dunfee, op. cit. 36. Austin, op. cit. 37. Shirley Sagawa and Eli Segal, Common Interest, Common Good: Creating Value Through Business and Social Partnerships (Cambridge, MA: Harvard University Press, 2000). 38. Fombrun, Gardberg, and Barnett, op. cit.

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39. Simon Knox and Stan Maklan, "Corporate Social Responsibility: Moving Beyond Investment Towards Measuring Outcomes," European Management Journal, 22/5 (2004): 508-516. 40. Thomas Dunfee, "Corporate Governance in a Market with Morality," Lawand Contemporary Problem, 62/3 (1999): 129-157. 41. Sandra Waddock and Neil Smith, "Corporate Responsibility Audits: Doing Vêll by Doing Good," Sloan Management Review, 41/2 (Winter 2000): 75-83. 42. Jill Klein and Hiraj Dawar, "Corporate Social Responsibility and Consumers' Attributions and Brand Evaluations in a Product-Harm Crisis," intemationalJoumal of Research in Marketing, 21/3 (September 2004): 203-217. 43. Elizabeth Creyer and William Ross, Jr., "The Impact of Corporate Behavior on Perceived ?xoA\xa.\a\u^," Marketing Letters. Ill (1996): 173-185. 44. Knox and Maklan, op. cit. 43. Shirley Sagawa, "New Value Partnerships: The Lessons of Denny's/Save the Children Partnership for Building High-Yielding Cross-Seaor Alliances," IntemationalJoumal of Nonprofit and Voluntary Seaor Marketing, 6/3 (2001): 199-214. 46. Bhattacharya and Sen, op. cit. 47. Geoffrey Smith and Ron Stodghill, "Are Good Causes Good Marketing," Business Week, March 21, 1994: 64-65. 48. Hess, Rogovsky, and Dunfee, op. cit. 49. Jennifer Griffin and John Mahon, "The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-Five Years of Incomparable Research," Business and Society, 36/1 (March 1997): 5-31. 50. Orlitzky, Schmidt, and Rynes, op. cit. 51. Brad Brown and Susan Perry, "Removing The Financial Performance Halo from Fortune's 'Most Admired' Companies," Academy of Management Journal, 37/5 (October 1994): 13471359. 52. N. Craig Smith, "Changes in Corporate Praaices in Response to Public Interest Advocacy and Actions," in Paul N. Bloom and Gregory T. Gundlach, eds., Handbook of Marketing and Society (Thousand Oaks, CA: Sage, 2001). 53. Frooman, op. cit. 54. Dawkins and Lewis, op. cit. 55. Murray and Montanari, op. cit; Smith (2003), op. cit. 56. Wallace Davidson and Dan Worrell, "The Effect of Product Recall Announcements on Shareholder Wealth," S/rfl/fy/cMfl)7(35e77rf«rJDMn7ii/, 13/6 (September 1992): 467-473; S. Pniitt and D. Peterson, "Security Price Reactions Around Recall Announcements," Journal of Financial Research, 9(1986): 113-122. 57. Frooman, op. cit. For a more recent review of the potential for CSR to insure firms' financial performance, see Schnietz and Epstein who examine the financial impaa of the WTO riots in Seattle. Karen E. Schnietz and Marc J. Epstein, "Exploring the Financial Value of a Reputation for Corporate Social Responsibility During a Crisis," Corporate Reputation Review, IIA (2005): 327-345. 58. Walter G. Blacconiere and Dennis Patten, "Environmental Disclosures, Regulatory Costs, and Changes in Firm Value," Journal of Accounting and Economics, 18/3 (November 1994): 357-377; Walter G. Blacconiere and W. Dana Nonhcut, "Environmental Information and Market Reactions to Environmental Legislation," Journal of Accounting, Auditing d Finance, 12/2 (Spring 1997): 149-178. 59. Valerie Folkes and Michael Kamins, "Effeas of Information About Firms' Ethical and Unethical Actions on Consumers' Attitudes," Journal of Consumer Psychology, 8/3 (1999): 243-259. 60. Robert Miles, Managing the Corporate Social Environment: A Grounded Theory (Englewood Cliffs, NJ: Prentice-Hall, 1987). 61. David Saiia, Archie Carroll, and Ann Buchholtz, "Philanthropy as Strategy," Business and Society, 42/2 (June 2003): 169-201; Subhabrata B. Banerjee, Easwar Iyer, and Rajiv K. Kashyap, "Corporate Environmentalism: Antecedents and Influence of Industry Type," Joumal of Marketing, 67/2 (April 2003): 106-122; Stephen Brammer and Andrew Millington, "The Effea of Stakeholder Preferences, Organizational Struaure and Industry Type on Corporate Community Involvement," Journal of Business Ethics, 45/3 (July 2003): 213-226; Michael Useem, "Market and Institutional Forces in Corporate Philanthropy," Califomia Management Review. 30/2 (Winter 1988): 77-88. 62. Smith (2003), op. cit.

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63. KPMG Intemalional Survey of Corporate Responsibility Reporting 2005, accessed online July 26, 2005 from . 64. Waddock and Graves, op. cit. 65. Pam Ellen, Lois Mohr, and Deborah Webb, "Charitable Programs and the Retailer: Do They Mix?" Journal of Retailing, 76/3 (Fall 2000): 393-406. See also Porter and Kramer [op. cit.] for a detailed review of the importance of a firm's effort and commitment in achieving social and economic objectives. 66. Bloom et al. argue that firms with primarily short-term relationships are seen less favorably because they are judged to be exploitative of the cause. Paul N. Bloom, Patti Yu Hussein, and Lisa R. Szykman, "Benefiting Society and the Bottom Line," Marketing Management, 4/3 (Winter 1995): 8-18. 67. Jerome L. Himmelstein, Looking Good and Doing Good: Corporate Philanthropy and Corporate Power (Bloomington, IN: Indiana University Press, 1997). 68. Valerie Swaen and Joelle Vanhamme, "The Uses of Corporate Social Responsibility in Communication Campaigns: Does Source Credibility Matter?" paper presented at the Association for Consumer Research conference, Portland, Oregon, October 7-10, 2004. See also Paul Argenti, "Collaborating with Aaivists: How Starbucks Works With NGOs," California Management Review, 47/1 (Fall 2004): 91-116. Argenti provides a case study of Starbucks's experiences in working with pressure groups. 69. Gordon Fairclough, "Study Slams Philip Morris Ads Telling Teens Not to Smoke," Wall Street Journal, May 29, 2002, p. Bl. 70. Debra Z. Basil and Paul M. Herr, "Dangerous Donations? The Effect of Cause-Related Marketing on Chanty Atiiludes," Journal of Nonprofit and Public Sector Marketing, 11/1 (2003): 59-77. For further discussion on firm/cause fit, see also Sen and Bhattacharya, op. cit.; Berger et al., op. cit.; John W. Pracejus and G. Douglas Olsen, "The Role of Brand/Cause Fit in the Effectiveness of Cause-Related Marketing Campaigns," Journal of Business Research, 57/6 (June 2004): 87-99. 71. Lisa R. Szykman, "Who Are You and Why Are You Being Nice? Investigating the Industry Effea on Consumer Reaction to Corporate Social Marketing Efforts," Advances in Consumer Research. 31 (2004). 72. Moskowitz is generally credited as being the first empirical examination of the link between CSR and CFP. Milton Moskowitz, "Choosing Socially Responsible Stocks," Business and Society Review. 1/1 (Spring 1972): 71-75.

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