Corporate Saints and Sinners: The Effects of Philanthropic and Illegal Activity on Organizational Performance

Abstract

This article utilizes a two-dimensional view of corporate social responsibility (CSR) to examine the relationships between corporate financial performance and experts9 ratings of CSR. The two dimensions are compliance/noncompliance with society9s minimal expectations (the law) and involvement/noninvolvement in praiseworthy or supererogatory behavior (philanthropic contributions). In this study, four groups of corporations are identified: (no crimes, high contributions); pharisees (no crimes, low contributions); (crimes, high contributions); and (crimes, low contributions). A survey of industry experts reveals that the saints and the cynics/repenters groups were rated significantly higher on CSR than the other two groups. Firms in the sinners group performed significantly poorer than the other three groups on two five-year financial performance measures. These results have important implications for the debate over the relationship between CSR and financial performance.