The Power of the People: Labor Unions and Corporate Social Responsibility

56 Pages Posted: 12 Jan 2021

See all articles by Amanda Heitz

Amanda Heitz

A.B. Freeman School of Business Tulane University

Youan Wang

The University of Hong Kong

Zigan Wang

The University of Hong Kong - School of Economics and Finance; Columbia University

Date Written: November 5, 2020

Abstract

We examine the claim that unions provide societal benefits by directly examining the effect unionization has on corporate social responsibility (CSR). For the average sample firm, a one standard deviation increase in the unionization rate is associated with a decrease in environmental and social (E&S) CSR scores of between 2.4% to 15.3%. This overall decrease in E&S CSR is driven by reductions in categories that primarily benefit stakeholders outside the firm, though we find that unionization leads to an increase in E&S CSR categories that primarily benefit their members. These results are more pronounced when unions have relatively high bargaining power, such as when firms have a headquarters in non-right-to-work states, counties with low unemployment, or industries with low levels of competition. However, this negative effect attenuates for distressed firms and those located in communities that are more likely to value socially responsible policies. Empirically, our results are robust to a close election setting, allowing us to draw causal inference about the effect unions have on determining levels of CSR and ultimately impacting non-shareholding external stakeholders. Our study contributes to two separate strands of literature. First, we further the unionization literature by examining the impact unions have on outside stakeholders. Second, we contribute to the literature focusing on CSR. While the bulk of this literature analyzes the merits of CSR investment, scholars are still discovering its determinants.

Keywords: labor union, elections, corporate social responsibility

JEL Classification: J51, D73, M14

Suggested Citation

Heitz, Amanda and WANG, Youan and Wang, Zigan, The Power of the People: Labor Unions and Corporate Social Responsibility (November 5, 2020). Available at SSRN: https://ssrn.com/abstract=3725784 or http://dx.doi.org/10.2139/ssrn.3725784

Amanda Heitz (Contact Author)

A.B. Freeman School of Business Tulane University ( email )

6823 Saint Charles Avenue
New Orleans, LA
United States

Youan WANG

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong
China
59353876 (Phone)

Zigan Wang

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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