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Journal of Business Ethics
Erschienen in: Journal of Business Ethics 2/2020

29.08.2018 | Original Paper

Employee Volunteer Programs are Associated with Firm-Level Benefits and CEO Incentives: Data on the Ethical Dilemma of Corporate Social Responsibility Activities

verfasst von: Brian D. Knox

Erschienen in: Journal of Business Ethics | Ausgabe 2/2020

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Abstract

Ethical dilemmas arise when one must decide between conflicting ethical imperatives. One potential ethical dilemma is a manager’s decision of whether to engage in corporate social responsibility (CSR) activities. This decision could pit the ethical imperative of honoring unwritten obligations to society against the ethical imperative of honoring contractual obligations to the firm. However, CSR activities might only be a minor ethical dilemma or none at all if they simultaneously benefit the firm and society. To examine this I test the association between future-period employee productivity and current-period use of one type of CSR activity: employee volunteer programs. I use a unique sample of 1428 firm-years, hand-collected from sustainability reports of 373 firms. I find evidence that the current-period use of an employee volunteer program has a positive association with future-period employee productivity (moderated by the firm’s current-period employee productivity). I find this result in future periods up to 6 years after a firm uses an employee volunteer program. I also find a positive association between incentives that focus CEOs’ attention on long-term firm outcomes and more extensive employee volunteer programs (also moderated by current-period employee productivity).
Vorheriger Artikel Inclusive Business at the Base of the Pyramid: The Role of Embeddedness for Enabling Social Innovations
Nächster Artikel Speaking Truth to Power: Twitter Reactions to the Panama Papers

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Fußnoten
1
There is some similarity between this explanation of what motivates people to engage in CSR activities and what motivates workers to reciprocate when a gift wage is received (e.g. Kuang and Moser 2009; Fehr and Gächter 2000).
 
2
I list improved employee skill level as a potential benefit from employee volunteer programs. This expectation may be more practical and intuitive than scholarly. Jones (2016) calls into question employee volunteer programs’ effect on employee skill level, arguing that the empirical evidence of this relationship is hardly compelling. Given that my hypotheses could be driven entirely by changes in employee loyalty, I expect that my conclusions would be largely unchanged if I were to remove any expectation that employee volunteer programs improve employee skill level.
 
3
In my tests of the moderating effect of current-period employee productivity, I also control for a main effect of current-period employee productivity on future-period employee productivity. I discuss this further in subsequent sections.
 
4
As explained in the “Sample and Measures” section and in the “Hypothesis Tests for H2a and H2b” subsection of the “Results” section, I define employee volunteer program extensiveness as the natural logarithm of total volunteer hours. I also include several firm-level measures to control for correlations between firm size and employee volunteer program extensiveness.
 
5
The term ethical dilemma is often used to describe fictional scenarios designed to bring multiple ethical imperatives into conflict. As teaching tools, fictional ethical dilemmas require students to think carefully about the conflicting ethical imperatives and to develop strategies for maximizing ethical behavior, which can be useful when actual ethical dilemmas arise in practice. In an ethical dilemma, actual or fictional, managers have no first-best option that allows them to fully act in accordance with all ethical imperatives. How people go about maximizing ethical behavior in ethical dilemmas is, of course, a source of extensive study in the field of ethics (e.g. Ryan and Bisson 2011; Priem and Shaffer 2001; Barnett et al. 1994; McCabe et al. 1994; Weber 1994).
 
6
Although I focus on improved employee loyalty and skill level as benefits of volunteer programs, volunteerism is also associated with several other types of self-improvement that might affect long-term employee productivity. For example, in summarizing research on the benefits of volunteerism, Brooks (2009) says, “People who volunteer do better financially [….] People who volunteer are happier [….] Volunteering actually gives people a mild sense of euphoria.”
 
7
In the organizational productivity literature, employee productivity is defined using a logarithmic transformation of an income statement performance measure divided by the number of employees (e.g. Bloom and Van Reenen 2011; Munday and Peel 1997; Huselid 1995). I discuss and use several such measures for employee productivity in the “Sample and Measures” and “Results” sections.
 
8
I am anecdotally aware of instances where this has happened, although I lack empirical evidence of the net effect these employees’ departure had on their respective firms.
 
9
For example, it may be that employee volunteer programs tend to coincide with inconsistencies in CSR strategies. Scheidler et al. (2018) find that inconsistent CSR strategies tend to lead to higher employee turnover intentions, and higher firm-level employee turnover rates.
 
10
Throughout the paper, I use period and year interchangeably. I refer to the current year as the current period and future years as future periods.
 
11
Prior research provides some limited survey evidence that employee engagement in employee volunteer programs can be dramatically affected by top management’s involvement or lack of involvement in these programs (Benjamin 2001; Seagram and Sons 1989). A secondary reason for including analysis of CEO incentives in this paper is to provide additional evidence in this regard.
 
12
At least, that is true for bankruptcy law in the United States. As described in the “Sample and Measures” section, my sample is restricted to United States firms.
 
13
This portion of my search was complicated slightly by the fact that company websites are constantly updated, and I sought sustainability reports that might be several years old. On occasion GRI or the company website indicated a report existed, but it was not in the GRI database and the current version of the company website held no active links to it. In these cases, I searched for and occasionally found these sustainability reports on company websites using an internet search engine.
 
14
A small number of sustainability reports contain data for multiple firm-years.
 
15
Table 1 includes all three of my main proxies for employee volunteer programs, two of which are discussed in the “Alternative Proxies for Employee Volunteer Programs” subsection. I include variable definitions below Table 2. Reports in the GRI database were observed in 2016. Some GRI figures referenced in Table 1 may change over time as additional reports are released.
 
16
That is, \({\text{ln}}\left(\frac{\text{sales}}{\text{employees}}\right)\). See, for example, Bloom and Van Reenen (2011).
 
17
It was more economical to hand-collect employee volunteer program variables than to use an automated protocol. Sustainability reports contain many different references to “hours,” such as total reportable incidence rate (which refers repeatedly to 200,000 work-hours as the basis for the rate), work hours without a loss-time event, training hours, hotlines (answered “24 hours a day”), kilowatt-hours, megawatt-hours, working hours, and so forth. Error rates from an automated protocol would be high. In “Alternative Proxies for Employee Volunteer Programs” I perform supplemental analysis that requires a determination of whether firms track total volunteer hours. This would be difficult to measure using an automated protocol.
 
18
LNTOTALHOURS has notable correlations with my three proxies for employee volunteer programs. As discussed later, VOLMENTION indicates whether companies’ CSR disclosures use the word “volunteer” and VOLSYSTEM indicates whether companies’ volunteer hours are presented as total hours. As shown in Table 4, VOLSYSTEM has a significant positive correlation with LNTOTALHOURS. This may mean that implementing a volunteer hour reporting system—allowing one to arrive at “total volunteer hours”—increases the completeness of volunteer hours reported. It could also mean that such a reporting system motivates employees to volunteer more.
 
19
I limit FUTURE_YEAR to year 6 to ensure a meaningful number of firms and firm-years are in my analysis.
 
20
Throughout the “Results” section, I use two-tailed significance tests at the 90% confidence interval. I use this relatively low confidence interval because many factors affect employee productivity and because I generally expect hypothesized effects to be small. I report significance using stricter confidence intervals in the tables. I also report raw p values in parentheses in Table 5 through 13. 
 
21
I also re-test each regression in Tables 5, 6 and 7 using two-digit industry indicator variables to control for industry fixed effects. When I do this, statistical support for H1a and H1b using GPPROD improves (i.e. all six future years produce a significant effect) and statistical support for H1a and H1b using SALESPROD and EARNPROD remains the same.
 
22
A more extensive treatment of the value and informativeness of monitoring systems (or simply information systems) is given by Marschak and Miyasawa (1968). The relevant equation in their analysis is Eq. 4.6 on page 145; that equation is comparable to Christensen and Demski’s (2003) Eq. 6.9, presented on page 114.
 
23
Table 3 shows a general pattern of monotonic increases in employee volunteer programs for each proxy of them and for every year in the sample. However, between 2008 and 2010, the percentage of firms that reported total volunteer hours (i.e. VOLSYSTEM) decreased precipitously. This is consistent with volunteer hour reporting systems being costly and with the recession from 2008 to 2009 affecting how many firms were willing to incur the additional costs of a volunteer hours reporting system.
 
24
In my initial tests of H1a and H1b, reported in Table 5 through 13, 31 of the 54 regressions I run support both H1a and H1b (at the 90% level of confidence, two-tailed). When I re-run these regressions with the fixed effects indicator variables described above, seven additional years provide significant results that support H1a and H1b (again at the 90% level of confidence, two-tailed). Using VOLPROGRAM, year 4 and year 5 with the proxy GPPROD are now significant. Using VOLMENTION, year 5 and year 6 with the proxy GPPROD are now significant. Using VOLSYSTEM, year 5 and year 6 with the proxy SALESPROD are now significant, as is year 4 with the proxy EARNPROD. Generally similar results obtain when I lower the confidence level to 95% or 99%.
 
25
If I raise the confidence level to 95%, three of these years are no longer significant: year 3 for SALESEMPROD and year 4 for GPPROD and EARNPROD.
 
26
I also re-run my Model 2 tests with added two-digit industry indicator variables to control for industry fixed effects. Results are unchanged in direction and significance.
 
27
The negative f2 statistics in Table 13 and 16 are most likely due to numerical artifacts, such as rounding. Given that the R2 statistics reported are a composite of both within-firm and between-firm variation (due to my data’s cross-sectional and longitudinal nature). This leads to the possibility of small negative, and erroneous, f2 statistics due to these composite R2 statistics.
 
28
Data in my sample are coded to the year in which the volunteering activity takes place rather than the year in which the report comes out.
 
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Metadaten
Titel
Employee Volunteer Programs are Associated with Firm-Level Benefits and CEO Incentives: Data on the Ethical Dilemma of Corporate Social Responsibility Activities
verfasst von
Brian D. Knox
Publikationsdatum
29.08.2018
Verlag
Springer Netherlands
Erschienen in
Journal of Business Ethics / Ausgabe 2/2020
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-018-4005-0

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