Wages and corporate social responsibility: entrenchment or ethics?
| DOI | https://doi.org/10.1108/ER-03-2022-0154 |
| Published date | 05 December 2022 |
| Date | 05 December 2022 |
| Pages | 495-515 |
| Subject Matter | HR & organizational behaviour,Industrial/labour relations,Employment law |
| Author | Patricia Crifo,Marc-Arthur Diaye,Sanja Pekovic |
Wages and corporate social
responsibility: entrenchment
or ethics?
Patricia Crifo
Centre de Recherche en
Economie et de Statistiques (CREST), CNRS,
Ecole Polytechnique, GENES, ENSAE Paris, Institut Polytechnique de Paris,
Palaiseau, France and
CIRANO, Montreal, Canada
Marc-Arthur Diaye
University Paris 1 Panth
eon Sorbonne (CES), Paris, France, and
Sanja Pekovic
University of Montenegro, Kotor, Montenegro
Abstract
Purpose –In this article the authors examine how corporate social responsibility (CSR) affects the wage policy
of firms. At the first glance, one may think that socially responsible firms want to attract employees via ethical
concerns and corporate culture, thereby inducing a negative link between CSR and wages. On the other side,
socially responsible firms can be expected to increase wages as social entrenchment strategies.
Design/methodology/approach –In order to correct for potential endogeneity bias, the authors employ a
simultaneous equation model (SEM) on a French data set that includes 13,186 employees.
Findings –The authors show that CSR has an ambiguous impact on corporate wage policy depending on the
type of monetary incentives and employee’s occupation considered.
Originality/value –The authors extend prior research on the CSR–wage relationship by distinguishing
between different forms of monetary incentives: the base wage, total wage and premium wage. Their results
draw attention to the fact that the employees’occupation do matter. The evidence confirms that the effect of
CSR on the wage is not to be taken for granted: it is wage form and occupation specific.
Keywords Corporate social responsibility, Wage compensation, Motivation
Paper type Research paper
1. Introduction
Today, firms in order to respond to social requests invest intensively in corporate social
responsibility (CSR). CSR refers to socially and environmentally friendly actions not only
required by law, but also going beyond compliance, privately providing public goods or
voluntarily internalizing externalities (Crifo et al., 2014).
CSR achieves firm’s advantage in meeting its responsibilities to various stakeholders,
such as employees, customers and the society at large (Turban and Greening, 1997). However,
previous studies offer mainly analyses concerning the CSR–financial performance link.
Overall, existing results tend to converge by showing that firms would benefit financially
from social performance, or at least that corporate social performance does not destroy
shareholder value, even if its effect on firm value is not large (Margolis et al., 2009). Despite the
considerable attention given to this issue in the literature, more investigation of the drivers of
CSR is necessary to provide further understanding of the subject. From this perspective,
Wages and
CSR:
entrenchment
or ethics?
495
JEL Classification —M14, M52, J30, C30
Patricia Crifo acknowledges the support of the program, IdR FDIR-Sustainable finance and
responsible investment (2016-2022).
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0142-5455.htm
Received 30 March 2022
Revised 28 October 2022
Accepted 9 November 2022
Employee Relations: The
International Journal
Vol. 45 No. 2, 2023
pp. 495-515
© Emerald Publishing Limited
0142-5455
DOI 10.1108/ER-03-2022-0154
recent research points to motivation-enhancing human resources (HR) practices (wages and
rewards) as a key driver of CSR decisions, and potential crucial determinants of the CSR–
performance relationship (Nyborg and Zhang, 2013). Moreover, Voegtlin and Greenwood
(2016) contend that human resource management (HRM) acts as a pivotal instrument in
understanding, developing and enacting CSR. Accordingly, previous scholars (Barrick et al.,
2015;Rothenberg et al., 2017;Lombardi et al., 2020;Pekovic et al., 2022) urge for an embedded
approach that connects the CSR and HRM system. However, while an innovative strand of
literature has recently emerged on socially responsible (or irresponsible) human resources
management practices ((SRHM), see, e.g. Omidi and Dal Zotto, 2022); the literature has
overlooked the role of HR as a potential tool for a more complete understanding of CSR (De
Stefano et al., 2018), and much more evidence is needed to analyze the impact of CSR on
various outcomes affecting employees (Hofman and Newman, 2014;Delmas and Pekovic,
2016,2018). Actually, little is known about the determinants at the employee level, in
particular, to understand if employees react positively to CSR because of wage improvement
and/or simply because they are satisfied to be part of a socially responsible firm.
As a signal for corporate culture, CSR can attract good employees or at least highly
qualified (Turban and Greening, 1997;Albinger and Freeman, 2000;Backhaus et al., 2002;
Grolleau et al., 2012;Burbano, 2016). Green firms can also recruit motivated employees with
teamwork values and hereby reduce costly employee turnover (Portney, 2008) or secure firm
survival and long-term performance (Brekke and Nyborg, 2008). In addition, CSR is positively
related to firm identification, trust in the employer, organizational commitment and
organizational culture, intention to stay, job satisfaction and employee happiness, working
conditions and organizational citizenship behaviors (Peterson, 2004;Brammer et al., 2007;
Kim et al., 2010;Shen and Zhu, 2011;Grolleau et al., 2012;Hofman and Newman, 2014;
Pekovic, 2015;Acharyya and Agarwala, 2020;Espasandin-Bustelo et al., 2021). For instance,
recently Acharyya and Agarwala (2020) concluded that corporate social performance boosts
employee experiences, satisfaction and retention that increase the attractiveness of the firm.
In turn, positive attitude and behavior of employees foster firm’s productivity and
profitability (Ahmad et al., 2020).
Although these studies are informative, they only indicate a part of the story as they
ignore the direct impact on employee’s wages that can have two conflicting outcomes. If
proactive HR policy tends to increase firm performance through productivity (see Delmas
and Pekovic, 2013,2018;Edmans, 2011;Jones and Murrell, 2001), motivated employees might
also be likely to accept lower wages than the fair market value because they are compensated
through the knowledge that their work satisfies their personal values (Frank, 1996;Gond
et al., 2010;Lanfranchi and Pekovic, 2014). Actually, as corroborated by Krueger et al. (2020),
firm’s sustainability engagement can be translated in the lower labor costs as sustainable
firms can attract and retain talent employees with corresponding preferences at lower wages
(the so-called sustainability wage gap). Furthermore, considering social concerns as non-wage
compensation, Bolving (2005) argues that social concerns can substitute for monetary
compensation. As indicated by Burbano (2016), employees are motivated by “purpose”in the
workplace and are willing to trade off monetary benefits for nonmonetary benefits. On the
contrary, it could be that investment in CSR improves employees’skills and human capital
(Lanfranchi and Pekovic, 2014) suggesting that they will receive higher wage (Bailey et al.,
2001). In addition, as indicated by Van Buren and Greenwood (2011), CSR firms can provide
positive outcomes to employees beyond what is defined by employment contract and
workplace regulation. For instance, since CSR firms are considered as more profitable, it
could be that part of their gain goes to employees.
Overall, proactive CSR can enhance employee productivity th rough various paths. Yet,
empiricalresearchon the topic is in itsinfancy and littlehas been clarifiedabout whatacademics
and business management understand to be a configuration of socially responsible human
ER
45,2
496
To continue reading
Request your trial