Do the Socially Responsible Walk the Talk?

59 Pages Posted: 18 Jun 2020 Last revised: 2 Oct 2020

See all articles by Aneesh Raghunandan

Aneesh Raghunandan

London School of Economics

Shivaram Rajgopal

Columbia Business School

Date Written: October 2, 2020


Several companies and funds claim to be socially responsible. We confront these claims with the data in two settings. In the first setting, we examine the August 2019 declaration by the Business Roundtable (BRT) that a corporation’s purpose is to deliver value to all stakeholders, rather than to solely maximize shareholder value. Relative to within-industry peer firms, 118 publicly listed signatories of the BRT statement (i) commit environmental and labor-related compliance violations more often (and pay more in compliance penalties); (ii) spend more on lobbying policymakers and receiving more in targeted government subsidies; and (iii) BRT CEOs receive higher abnormal compensation and BRT firms have a smaller proportion of independent directors on the board. A concurrent trend is the rapid expansion of socially responsible funds. Relative to same-issuer non-ESG (environmental, social and governance focused) funds, we find that 145 ESG funds over 2010-2018 contain portfolio firms with poorer labor and environmental track records, spend more on lobbying and receive larger state subsidies relative to portfolio firms in non-ESG funds. In sum, we find that socially responsible firms and funds do not appear to follow through on proclamations of concerns for stakeholders.

Keywords: social responsibility, ESG, Business Roundtable, environmental and labor laws, ETF, mutual fund, KLD, Asset4, Violation Tracker.

JEL Classification: M14, G23, G34

Suggested Citation

Raghunandan, Aneesh and Rajgopal, Shivaram, Do the Socially Responsible Walk the Talk? (October 2, 2020). Available at SSRN: or

Aneesh Raghunandan (Contact Author)

London School of Economics ( email )

United Kingdom

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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