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The liability factor of being responsible

The liability factor of corporate social responsbility

U.S. Coast Guard/Reuters/U.S. Coast Guard/Reuters

Proponents of corporate social responsibility (CSR) programs argue that they build up a reservoir of good will that can help companies if they run into a problem that puts them in the spotlight in a negative way. But recent research shows that rather than acting as a form of insurance, a strong CSR record can be a liability.

Jiao Luo and Stephan Meier of Columbia Business School and Felix Oberholzer-Gee of Harvard Business School looked at the oil industry and found the news media far more likely to report accidents if they occur at a company with a strong CSR record. That could be because the accidents are more surprising and thus more newsworthy, and it's possible – using the insurance hypothesis – that the media would be more sympathetic to the company.

But that doesn't appear to happen: The researchers' analysis of the tone of coverage shows that news reports are no more positive for CSR leaders in crises than for other companies.

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That doesn't mean companies should ignore social responsibility. The researchers found that oil spills at companies with the poorest environmental performance are also highly likely to draw media attention. Past regulatory problems at a company, for example, increase the likelihood that an accident will be reported.

"Executives who wish to minimize the risk of media attention to negative events need to be careful not to place their organizations at the very top or the very bottom of CSR rankings. Being in the middle of the pack, our estimates imply, generates the least amount of coverage," they conclude.

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About the Author
Management columnist

Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online column, Power Points. More

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