Can Socially Responsible Firms Survive Competition? An Analysis of Corporate Employee Matching Grants

Abstract:     
Fifty-five percent of S&P 500 firms have employee matching grant schemes. Matching grants act as a coordination mechanism which reduces free-riding by socially conscious employee-donors who value a public good but prefer someone else to pay for it. The popularity of matching schemes demonstrates that socially responsible firms can survive market competition. Our model shows that such schemes can enhance the welfare of socially conscious employees and raise more for charities without reducing profits for investors in firms operating in competitive labor and capital markets. This will be so provided socially conscious employees are either more productive or value working together. We document that labor productivity is higher at firms with matching schemes and that these firms are also more likely to be ranked as one of the “100 Best Companies to Work for.”

Number of Pages in PDF File: 46

Keywords: Employee matching grants, corporate social responsibility, stakeholder society

JEL Classification: D03, D21, H41, L31

working papers series