Abstract

I analyze corporate social responsibility (CSR) from economic and financial perspectives, and suggest how it is reflected in financial markets. CSR is defined as a programme of actions to reduce externalized costs or to avoid distributional conflicts. It has evolved in response to market failures, a Coasian solution to problems associated with social costs. The analysis suggests that there is a resource-allocation role for CSR programmes in cases of market failure through private-social cost differentials, and also where distributional disagreements are strong. In some sectors of the economy private and social costs are roughly in line and distributional debates are unusual: here CSR has little role to play. Such sectors are outnumbered by those where CSR can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. It can also act to improve corporate profits and guard against reputational risks.

Download PDF

Citation

Heal, Geoffrey. "Corporate Social Responsibility? An Economic and Financial Framework." Geneva Papers on Risk and Insurance: Issues and Practice 30, no. 3 (July 2005): 387-409.

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.