The Power of the People: Labor Unions and Corporate Social Responsibility
56 Pages Posted: 12 Jan 2021
Date Written: November 5, 2020
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: Suggested Citation