Academic journal article Entrepreneurship: Theory and Practice

Commentary: "Family Firms and Social Responsibility: Preliminary Evidence from the S&P 500"

Academic journal article Entrepreneurship: Theory and Practice

Commentary: "Family Firms and Social Responsibility: Preliminary Evidence from the S&P 500"

Article excerpt

This commentary focuses on four themes: (1) empirical relevance of corporate social responsibility (CSR) in family firms; (2) complementary theoretical explanations to CSR behavior in family firms; (3) the need for stringent definitions in family business research; and (4) the potential for dual causality between family ownership and more generous CSR policies. Specifically, I argue that agency theory can lead to additional valuable insights about CSR in family firms.

Introduction

As family business research is expanding and maturing, we are seeing a wider range of topics explored and theories applied. The article "Family firms and social responsibility: Preliminary evidence from the S&P 500" by Dyer and Whetten (2005) represents an effort in this direction. These authors explore if corporate social responsibility (CSR) is approached differently in family vs. nonfamily firms using theories on organizational identity, image, and identification. CSR is a well-researched area, and theories on organization identity have been used to explain organizational phenomena in the past. However, as far as I am aware, this is the first time that these issues are approached in a family business context. Analyzing the 500 largest U.S. companies using data from Standard & Poor's S&P 500, they examine whether or not those companies controlled by families exhibit greater CSR than other companies. In a clever way, they draw on previous studies of the S&P 500 for definitions of family and nonfamily firms and for measures of CSR.

Central to their argument is that there are spillover effects between the family and their firm. Family values spill over on corporate values, bad publicity spills over from the firm to the family, and so on. Family businesses, therefore, are more likely to be more concerned about CSR and to exhibit a more positive CSR behavior. In the following discussions, I will offer comments on the article and suggestions for future research in the spirit of Dyer and Whetten along four themes. The themes are as follows: (1) empirical relevance of CSR in family firms; (2) complementary theoretical explanations to CSR behavior in family firms; (3) the need for stringent definitions in family business research; and (4) the potential for dual causality between family ownership and more generous CSR policies.

Relevance of CSR Research in Family vs. Nonfamily Firms

The topic is nontraditional in the family business context. An obvious question is if it is important and adds value. My own country, Sweden, provides a case in point, suggesting that the article is highly relevant and linked to a wider debate on the consequences of corporate ownership structures. In the 1970s, Swedish capitalist families were under a lot of pressure. Following the left-wing movement that swept across Europe, claims were made that these families made excessive financial gains at the expense of their workers. In particular, the Wallenberg family, which controlled companies such as Electrolux, Saab, ASEA (later ABB), and Ericsson, was criticized. Some people became so engaged that they even wrote songs about it! The social democrats were seriously discussing the socialization of the commercial banks, the largest one of which is controlled by the Wallenberg family.

Since then, much has changed. Apart from changes in political views, ownership of the stock exchange has shifted dramatically. Institutional investors now dominate the stock exchange, including a rapid increase of international institutional capital. Currently, worries are quite different. In the media, institutional owners are viewed as ruthless short-term investors, only interested in the next quarterly report, ready to shift their investments or close plants at a whim. The major problem is that these investors are faceless so it is impossible to hold them accountable for the consequences of their decisions. Industrial families, including Wallenberg, on the other hand, are now viewed as responsible owners interested in the long-term viability of the firms they control. …

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