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This cross-country study focuses on internal rather than external corporate social responsibility (CSR). In a nutshell, we investigate how firm and country characteristics affect the likelihood of a firm having a CSR statement. In turn, we examine how the existence of a CSR statement affects the ways whereby the firm downsizes its workforce as well as how much it invests in the latter. We call this employer-employee interdependence.

More specifically, we attempt to answer the following research questions. Are stock-exchange listed firms more likely to have a CSR statement? Are multi-national enterprises (MNEs) more likely to have CSR statements than their domestic peers? Using the LaPorta et al. classification of legal families, are firms in common law countries less likely to have a CSR statement? Finally, is there a correlation between the existence of a CSR statement and higher levels of employer-employee interdependence?

The study benefits from the extensive survey data collected by the Cranet network (https://learn.som.cranfield.ac.uk/cranet). We have data on more than 4,000 firms from 30 different countries included in the 2009/10 wave of the Cranet survey. The survey covers organizations with more than 100 employees within the major sectors in each country. It focuses on HRM practices and policies. Given the sensitivity of the questions asked, responses are anonymised. While we are unable to match our survey data with financial data, our dataset benefits from two major advantages. First, it includes listed and unlisted firms. Second, our dataset benefits from very granular data on employment practices. For example, our Employment Change index distinguishes between seven different ways whereby companies downsize their workforce. Similarly, we have detailed data on the number of days spent on training.

We find that firms in civil law countries are more likely to have CSR statements, and that this is associated with greater employer-employee interdependence. Our study confirms the relevance of not just external but also internal linking of CSR behaviour to the country’s legal family, and the weaker incentives for socially responsible behaviour in common law countries.

In contrast, existing literature suggests that the opposite is the case: as reputational crises are less likely in civil law countries, there is less need for CSR statements. However, we also find that firms with higher scores on the LaPorta et al. (2008) investor rights index were more likely to have a CSR statement. This suggests that the investor rights index and legal origin are not interchangeable. We found that listed firms were more likely to have a CSR statement. This suggests that shareholders do worry about their firm’s reputation and do not necessarily equate CSR with a waste of resources. We also found MNEs were more rather than less likely to have CSR statements. This is contrary to existing studies which suggest that MNEs drive down standards rather than lead by example. 

To conclude, our study suggests that national corporate governance systems are more complex and multi-dimensional than some theories might suggest. It is perfectly possible for a national system to offer both high shareholder and stakeholder rights. To date, the comparative corporate governance literature on the behaviour of MNEs is sparse. We found that multi-nationality matters as MNEs were more likely to adopt employee-friendly practices.

 

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