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Over the last several decades, businesses have faced mounting pressures from diverse stakeholders to alter their corporate operations to become more socially and environmentally responsible. In turn, many firms appear to have responded by implementing more sustainable practices — measuring, documenting, and publishing annual CSR or sustainability reports to showcase how they are addressing important issues in this area, including: resource stewardship, waste management, greenhouse gas emission reductions, fair and safe labor practices, amongst other stakeholder concerns. And yet, research in this domain has not yet systematically examined whether businesses have, on the whole, changed their practices in tandem with the important changes in its institutional context over time. Have corporate CSR initiatives, in fact, been growing over the last 25 years or has the increased attention to CSR actually been much ado about nothing? In this chapter, we review the empirical literature on CSR to uncover that common measures of CSR such as the KLD do not support the concept that CSR practices have increased substantively over the last 25 years. We supplement this historical review by modeling the growth curves of CSR implementation in practice and find that the pace of positive change has indeed been glacial. More alarmingly, we also look at corporate social irresponsibility (CSiR) and find that, contrary to expectations, businesses have become more, not less, irresponsible during this same time period. Implications of these findings for theory are presented as are suggestions for future research in this domain.

A firm’s ethical behavior is commonly perceived beneficial to the firm and its investors in the literature. However, activities of corporate social responsibility (CSR) are often delivered with multiple purposes, and their expenses are aggregated with other expenditures in financial statements. These two features motivate the authors to hypothesize and find that investors’ ability to predict future earnings of ethical firms may not be improved through observing the CSR activities. The study aims to suggest that CSR spending should be expressed separately from other expenses in financial reports to help investors predict the future performance of CSR firms.

The authors use future (forward) earnings response coefficients (FERC) to testing whether current stock returns reflect correct information about future earnings. The basic specification of FERC framework, initially developed by Collins et al. (1994), is a regression of current-year stock returns on past, concurrent and future reported earnings with future stock returns as a control variable. A significantly positive FERC provides evidence that investors have rich and correct information about future earnings.

The authors find less future earnings information contained in current stock returns for firms with higher intensity of CSR activities. The association is also negative between current stock returns and future earnings reported by firms with a higher degree of CSR spending aggregated with selling, general and administrative expenses (SG&A). In additional analyses, the intensity of CSR activities is positively associated the uncertainty of benefits, measured by the standard deviation of future earnings over the next five years. This future earnings variability does not exist, even though CSR spending is aggregated with SG&A, consistent with the basic principle that accounting expenses create no future economic impacts.

The authors contribute to the current debate over consequences of CSR activities and accounting for CSR spending from a different angle. A common belief is that voluntary disclosure on CSR activities would aid in reducing costs of equity capital and financial reporting errors. These studies provide corporate managers with good reasons and motivations to expect beneficial consequences of voluntary disclosure. The results show that general investors are less capable of predicting future earnings when there is a higher degree of CSR spending aggregated with SG&A. It also highlights potential problems in the disclosure of general-purpose financial reporting to accounting standard setters.

This paper aims to draw on the stakeholder theory to examine the association between corporate governance and social responsibility.

This paper hypothesized that corporate governance is positively associated with corporate social responsibility (CSR), and good corporate governance also leads to good social responsibility in the following year. Corporate governance was measured by using the corporate governance index provided by Brown and Caylor (2006, 2009). CSR data come from Kinder, Lydenberg and Domini (KLD), Inc.

Regression analysis documents significant evidence to support a positive association between corporate governance and social responsibility. Evidence suggests that good governance leads to good CSR performance.

The results should interest managers who engage in behavior leading to or maintaining strong corporate governance mechanisms, financial analysts who conduct research on corporate governance and firm performance and policymakers who design and implement guidelines on corporate governance mechanisms. Moreover, results of this study can increase individual investors’ confidence in investing in companies with stronger corporate governance.

The purpose of this paper is to explore the association between a chief finance officer's (CFO's) financial expertise and corporate social responsibility (CSR).

The paper's sample consists of firms from the 2005 S&P 500 Index. Data on CSR come from Kinder, Lydenberg, and Domini (KLD), Inc. Data on CFO financial expertise were had collected. Consistent with prior research, experience (tenure), education (masters of business administration degree), and professional experience (certified public accountant designation) are used to measure the CFO's financial expertise.

Using a sample of S&P 500 firms from 2005, it is found that CFO experience (measured by tenure) is positively related to CSR at a significant level. In addition, the results indicate that CSR activities are not related to the CFO's education (measured as a Master's of Business Administration degree) or accounting expertise (measured as certified public accountant designation). The findings suggest that CFOs with more experience engage in more CSR activities than CFOs with less experience.

This study is valuable for several reasons: First, the study contributes to both the CSR literature and the CFO financial expertise literature by delivering new evidence on the link between CFO financial expertise and corporate social responsibility. Second, the study provides useful information to boards of directors, corporations and investors on certain CFO characteristics associated with effective CSR. Third, the study provides empirical evidence to support the suggested shift in the CFO's role from accountant to co‐driver of a firm's long‐term strategy.

This chapter examines the association between corporate governance and environmental performance. The purpose of governance mechanisms is to build trust by ensuring that corporate responsibilities, including environmental responsibilities, are met. We obtain corporate governance data from the Investor Responsibility Research Center, Inc’s (IRRC’s) governance and director database and additional corporate governance and environmental performance data from Kinder, Lydenberg, and Domini’s (KLD’s) database. Our analyses document a significant positive association between corporate governance and environmental performance. Moreover, we find that corporate governance is positively related to environmental strengths, and negatively related to environmental concerns. Our findings contribute to and extend our understanding of the relationship between governance and performance and have important implications for policy makers, managers, investors, and others.

Purpose – The purpose of this study is to investigate whether a firm’s cost structure (specifically, its cost stickiness) is associated with environmental, social, and governance (ESG) sustainability factors of performance and disclosure.

Methodology/approach – This study uses MCSI Research KLD Stats (KLD) and Bloomberg databases for the 13-year period from 2003 to 2015 in constructing ESG performance and disclosure variables, respectively. The authors adopt the general cost stickiness models from Anderson, Banker, and Janakiraman (2003) and Banker, Basu, Byzalov, and Chen (2016) to perform the analysis.

Findings – The authors find that a firm’s level of cost stickiness is positively associated with certain sticky corporate social responsibility (CSR)/ESG activities (both overall and when separately classified as strengths or concerns) but not with other nonsticky CSR activities. The authors also show that the association between cost stickiness and ESG disclosure is incrementally stronger for firms with CSR activities classified as sticky. Furthermore, the authors provide evidence that ESG disclosure is greater when both cost stickiness and the degree of sticky CSR activities increase. The authors show that when cost stickiness is high and CSR activities are sticky, management has incentives to increase CSR/ESG sustainability disclosure to decrease information asymmetry.

Originality/value – The findings present new evidence to understand how management integrates cost management strategies with various dimensions of sustainability performance decisions and show that not all ESG activities are equally effective when it comes to cost stickiness. The authors also demonstrate that increased sustainability disclosure helps reduce information asymmetry incrementally more when both costs are sticky and CSR activities are sticky.

The purpose of this paper is to examine the relationships between earnings management (EM) and subsamples of corporate environmental responsibility (CER).

KLD data are used to generate subsamples of environmental “strengths” and “concerns”. Differences in EM are studied across subsamples, using discretionary accruals to proxy for EM. The samples consist of 2,171 US firms.

Firms with at least one environmental strength do not exhibit statistically different levels of EM, relative to environmentally neutral firms, while firms with at least one environmental concern do exhibit statistically greater EM (greater income‐increasing discretionary accruals), relative to other sample firms. Further, firms with multiple environmental concerns exhibit greater EM than firms with a single environmental concern. These findings do not support the political cost hypothesis per the CER/EM literature, but they do support the institutional hypothesis (in the case of environmental strengths) and myopia avoidance hypothesis (in the case of environmental concerns) per the broader corporate social responsibility (CSR)/EM literature.

The findings are limited to US firms; results may not be transferable to other countries. KLD data are binary, and thus may not capture the full array of CER.

The findings may aid interested parties in detecting EM.

The paper provides a new testing environment for theoretical frameworks established in the CER/EM and CSR/EM literatures. Additionally, the findings differ across subsamples, suggesting that the relationship between CER and EM is asymmetric.

This study seeks to examine CSR theorists' criteria from the corporate executive's perspective. It aims to find out how corporate executives perceive CSR and how they would like to be perceived as CSR implementers.

The study uses Delphi research and data analysis to build up three sets of questionnaires. It was only the first set where the author introduced his questions but the other two sets were created from the executives' answers in previous stage. It is then all about executives' perception; no one has put words in their mouths. The study compares KLD (the famous research and analytics company) criteria which are used to celebrate annually the 100 best corporate citizens list with the participating executives' criteria.

The study found that executives lean more towards self‐regulation and self‐determination. Panelists disregarded any suggestion of regulating executives' salary/compensation as CSR criteria. They reject CSR criteria as a measure of good, bad, or ugly performance. They focus more on non‐profit organizations and their charitable contributions. However, the study was able to identify great agreement in the area of transparency, ethical practices, consumer rights, and diversity.

The study picked up its sample of executives from the high tech industry, mainly in Silicon Valley, California. The panelists did not represent a random and mixed sample of executives from different industries.

The study might be the first Delphi research conducted online to suit time‐constrained, busy panelists who know how to use the internet effectively.

This study aims to focus on developing the sustainability reporting index (SRI) with combined perspectives from varied social rating agencies, along with integrated combined perspectives from academics experts and Indonesian companies.

The first section discusses the theoretical framework along with the sustainability challenges faced by companies in Indonesia. The second section develops the methodology of the study to measure the SRI by considering practical and theoretical perspectives, starting from the identification of initial disclosure, selecting the final disclosure and developing the hierarchical framework. Lastly, the third section confirms the validity of the study’s framework by the exploratory factor analysis method and its comparability by comparing the content analysis result of the study with the Kinder–Lydenberg–Domini (KLD) method. The content analysis was used to analyze annual reports, sustainability reports and companies’ websites based on indicators found in the resulted model.

The main finding is the SRI framework (SRIF) of the study, which is built on the basis of the stakeholder relationship theory and is focused on three main dimensions (social, economic and environmental). Specifically, the framework consists of 17 indicators and 93 sub-indicators. On the basis of factor analysis method, it can be safely said that the study’s SRIF is quite valid. The high score of correlations between the SRIF and KLD results at the composite and dimension levels, along with the statistically significant results show that the study’s SRIF results and KLD results are fairly similar.

The present study has its limitation as it only gathers data from publicly available reports issued by the firms (secondary data). Owing to time limitation, primary data are not collected. However, this is also the strength of this research as it will allow investors to replicate the study’s methodology to measure companies’ sustainability.

The study is useful to organizations and statutory bodies toward finding a replicable method to measure the Indonesian companies’ social performance. In addition, the study also introduced the usefulness of the qualitative program Atlas TI to perform content analysis, the exploratory factor analysis method to ensure validity and comparability by comparing it to the KLD methodology, which is known globally as the most widely accepted methodology to measures social performance. Lastly, this study will provide implications to the Government to ascertain the level of SRI reporting among the Indonesian public-listed companies.

The resulted framework in this study simultaneously considers social, environmental and economic factors in the context of companies in Indonesia, while previous researchers have constructed reporting index separately (i.e. Sumiani et al., 2007; Zhao et al., 2012). Especially in the context of Indonesia, there is no such index simultaneously focused on the three main dimensions, namely, social, environmental and economics. The current study tries to fill the gap by using the constructed SRI index based on three perspectives combined, namely, social rating agencies, academic theorist and Indonesian companies.

The purpose of this paper is to examine the association between corporate social responsibility (CSR) and financial performance.

This paper performs an empirical test on the association between CSR and financial performance of a firm.

The regression analysis reveals a significant and positive association between CSR and financial performance. In addition, it finds that the age of long‐term assets is highly correlated with CSR.

This paper extends Cochran and Wood by using a larger and more recent sample to examine the association between CSR and financial performance of a firm. It contributes to the CSR literature.