Do Socially Responsible Firms Walk the Talk?

Forthcoming, Journal of Law and Economics

59 Pages Posted: 18 Jun 2020 Last revised: 27 Nov 2023

See all articles by Aneesh Raghunandan

Aneesh Raghunandan

London School of Economics

Shivaram Rajgopal

Columbia University - Columbia Business School, Accounting, Business Law & Taxation

Date Written: November 2, 2023

Abstract

Several firms claim to be socially responsible. We confront these claims with data using the most notable recent proclamation, the Business Roundtable’s (BRT) 2019 Statement on the Purpose of a Corporation. The BRT is a large, influential business group containing 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 shareholder proposals. We also do not observe post-signing improvements along these dimensions, suggesting 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.

JEL Classification: M14, G23, G34

Suggested Citation

Raghunandan, Aneesh and Rajgopal, Shivaram, Do Socially Responsible Firms Walk the Talk? (November 2, 2023). Forthcoming, Journal of Law and Economics, Available at SSRN: https://ssrn.com/abstract=3609056 or http://dx.doi.org/10.2139/ssrn.3609056

Aneesh Raghunandan (Contact Author)

London School of Economics ( email )

United Kingdom

Shivaram Rajgopal

Columbia University - Columbia Business School, Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

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