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Revisiting the Effect of Family Involvement on Corporate Social Responsibility: A Behavioral Agency Perspective

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Abstract

This paper sheds light on the incongruent findings concerning the relationship between family involvement and firms’ corporate social responsibility (CSR). While prior studies have mainly taken the perspective of families’ socioemotional wealth preservation, we approach this relationship from the perspective of behavioral agency theory, highlighting the important role played by CEOs’ family memberships. Specifically, we posit that family firms are more likely to invest in CSR when their CEOs are members of the controlling families. Furthermore, we examine how family firms can employ long-term incentives to encourage non-family CEOs to act in the interests of the controlling families to preserve SEW and thus enhancing family firms’ CSR performance. We tested our hypotheses using hand-collected data of family firms included in the S&P 500 index, in the period of 2003–2010. The empirical findings support our hypotheses that (a) family firms with family members as the CEOs have better CSR performance and (b) family firms tend to provide a high level of long-term incentives to non-family than family CEOs. In addition, long-term incentives strongly motivate CEOs to improve firms’ CSR performance, regardless of their family memberships.

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Notes

  1. We thank an anonymous reviewer for pointing this out and recommending additional analyses.

  2. The results are not tabulated for brevity.

  3. According to KLD rating definitions and Dyer and Whetten (2006), “Governance” refers to transparency, ownership, and political accountability to social and environmental issues. “Community” refers to such aspects as charity donation, support for education, and other community-related activities. “Diversity” refers to the diversity of employees in terms of their gender, ethnics, and physical conditions. “Employee” refers to employee right protection such as union, profit sharing, and fair compensation. “Environment” refers to environmental protection-related effort, such as pollution prevention and recycling. “Human rights” refers to human rights issues such as labor rights and Indigenous people’s relations. “Product” refers to quality program, R&D investment, and innovation.

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Authors and Affiliations

  1. Asper School of Business, University of Manitoba, 181 Freedman Crescent, Winnipeg, MB, R3T 5V4, Canada

    Victor Cui, Mingzhi Liu & Zhenyu Wu

  2. Telfer School of Management, University of Ottawa, 55 Laurier Avenue East, Ottawa, ON, K1N 6N5, Canada

    Shujun Ding

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  1. Victor Cui
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Correspondence to Mingzhi Liu.

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Cui, V., Ding, S., Liu, M. et al. Revisiting the Effect of Family Involvement on Corporate Social Responsibility: A Behavioral Agency Perspective. J Bus Ethics 152, 291–309 (2018). https://doi.org/10.1007/s10551-016-3309-1

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