Corporate Philanthropy, Employees and Misconduct

53 Pages Posted: 22 Dec 2013 Last revised: 24 Oct 2016

Frederick L. Bereskin

University of Delaware

Terry L. Campbell II

University of Delaware - Department of Finance

Simi Kedia

Rutgers Business School

Date Written: February 23, 2016

Abstract

Corporate charitable programs help attract and retain socially aware employees and directors. As these employees and directors are likely to be conscious of the social harm caused by corporate misconduct, they are less likely to tolerate wrongdoing. Consistent with this notion, we document that employees at philanthropic firms are more likely to whistle blow when they observe wrongdoing. Moreover, directors at giving firms are more likely to force out a CEO after misconduct is revealed. The higher likelihood of whistle blowing along with greater penalties upon discovery should lower the propensity to engage in misconduct. In line with this, we find that corporate philanthropy is associated with less misconduct. To address the endogeneity of corporate giving, we instrument it by peer giving, with qualitatively similar results. The results are robust to differing approaches for defining misconduct and employer attractiveness, and also in different subsamples of the data. Our findings highlight the role of non-financial imperatives of employees and directors in mitigating misconduct.

JEL Classification: G30, G34

Suggested Citation

Bereskin, Frederick L. and Campbell, Terry L. and Kedia, Simi, Corporate Philanthropy, Employees and Misconduct (February 23, 2016). Available at SSRN: https://ssrn.com/abstract=2370482 or http://dx.doi.org/10.2139/ssrn.2370482

Frederick L. Bereskin (Contact Author)

University of Delaware ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Terry Lee Campbell II

University of Delaware - Department of Finance ( email )

College of Business and Economics
Newark, DE 19716
United States

Simi Kedia

Rutgers Business School ( email )

117 Levin
94 Rockafellar Road
Piscataway, NJ
United States
8484454195 (Phone)

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