Doing Well While Doing Good: Do Firms' Profit Motives for Doing Good Matter to Employees?

Abstract

Making profits while doing good is becoming a popular approach to corporate social responsibility (CSR) in many firms. In this study, we use experiments to investigate whether this win-win approach to CSR has consequences for employee's perceptions of their employer and their opportunistic behavior. In Study 1, participants are presented with scenarios of a hypothetical firm. We find that participants' perceptions of moral integrity and opportunism of the hypothetical firm are significantly less favorable if the firm engages in win-win CSR compared to engaging in more philanthropic CSR, which does not have apparent profit motives. We also find that participants' perceptions of the opportunism of the hypothetical firm that engages in win-win CSR carry over to their perception that employees are more likely to misreport in such a firm. In Study 2, we conduct a field experiment with 1,500 employees to investigate the spillover effects on actual employee opportunism. Despite finding significant changes in employees' perceptions of their employer, we find that neither win-win CSR nor philanthropic CSR affect employee opportunism compared to a baseline. Instead, we find that engaging in win-win CSR significantly increases the employee turnover-rate compared to philanthropic CSR. Supplementary analysis provides an explanation for why we observe no treatment effects of win-win CSR on employee opportunism; employee opportunism is positively linked with employees' perceptions of the moral integrity and opportunism of employer but engaging in win-win CSR affects these perceptions in an opposite manner such that they offset each other, resulting in no overall effect of win-win CSR on employee opportunism. Collectively, our results suggest that adding an apparent profit motive to CSR initiatives undermines employees' positive perceptions of engaging in CSR, reduces the firm's attractiveness as an employer, but does not seem to directly affect actual opportunistic employee behavior.