CSR as Reputation Insurance: Primum Non Nocere

Abstract

We provide a theoretical framework showing how CSR activities can insure a firm against lost reputation in the face of adverse events.We offer evidence for this linkage through a case study and a multi-year analysis of stock price responses for S&P 500 companies following product recalls.We find that firms with better CSR ratings fare better than those that do not.Furthermore, a firm that is exceptional in both doing good and avoiding harm suffers virtually no reputational damage following events.Using the results of the study, we offer a guide to managers for determining the appropriate amount and mix of CSR to undertake.