Corporate Social Responsibility and Employee Retention

Abstract

Utilizing administrative data from the U.S. Census, this study provides first direct evidence on the impact of corporate social responsibility (CSR) on employee retention. Exploring both positive and negative shocks to firms’ CSR policies, our findings reveal a significant impact on the separation rate of CSR-conscious employees within an employer, with no discernible effect on others. Our results suggest that employer-employee values alignment constitutes an important nonfinancial job benefit that enhances employee retention. Our estimation also suggests that employees’ willingness to pay for CSR and the cost savings from reduced employee turnover associated with better CSR provisions are economically meaningful.

Keywords: employee retention, corporate social responsibility, CSR, environmental consciousness, social consciousness, financial incentive, non-financial incentives, non-financial job benefit

JEL Classification: G13, G14, G41, G23, J31, L25, M52