Magazine article Stanford Social Innovation Review

The Outsiders

Magazine article Stanford Social Innovation Review

The Outsiders

Article excerpt


Why some companies donate to charity

What drives some companies to donate money to charities, invest in local communities, or spend time and resources supporting the arts while others never look beyond meeting quarterly earnings? According to a new study, it may depend upon whether the board of directors includes outsiders.

Recent revelations of corporate mismanagement and coverups have fueled the call for boards of directors to wake up and be more vigilant on their watch. The study, "Board Members in the Service Industry: An Empirical Examination of the Relationship Between Corporate Social Responsibility Orientation and Directorial Type," shows that in addition to serving shareholders better, outside directors may be more sensitive to the company's role in society.

The study was conducted by management professors Nabil Ibrahim and Donald Howard of Augusta State University, and John Angelidis of St. John's University. It was published last November in the Journal of Business Ethics (vol. 47, no. 4).

The researchers surveyed 307 board members - 198 outside directors and 109 inside directors - from companies in the service industry. The companies on average had more than 100 employees and annual sales of above $160 million. Each director was presented with a set of 20 statements, designed to measure the relative priority he or she placed on the company's legal, economic, ethical, and "discretionary" responsibilities. "Discretionary" responsibilities are purely voluntary obligations that flow from the company's desire to improve the welfare of society. …

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