Socially responsible companies laid off more workers than others during the COVID-19 pandemic

Doctoral candidate Veda Fatmy says that the high level of CSR is not a good indicator of job security during economic crises. The financial and unemployment crisis brought on by the Covid-19 pandemic is one example of this. 

– In fact, high-CSR firms were shown to have laid off significantly more employees in the United States in 2020. The number of laid-off workers was 1.5 times higher than in the other companies, says Fatmy, who will publicly defend her doctoral dissertation on Friday 4th of November. 

According to Fatmy, this phenomenon may be due to more resources and strategic agility in these companies, which improves the outcomes of complicated restructuring decisions. 

– This new finding serves also as a warning that CSR may not always benefit workers and other vulnerable stakeholders.  Employees should remain cautious about the effectiveness of CSR.  While social responsibility is meant to safeguard the wellbeing of the employees and the community at large, during crises these values may be overlooked in pursuit of short-term gains.   

Do companies and their employees benefit from CSR?  

Veda Fatmy's doctoral dissertation focuses on contemporary CSR-related policies and how they shape stakeholders' expectations, corporate behaviour, and financial outcomes. 

Companies with high level of social responsibility are more likely to be inclusive and diverse, uphold a higher standard of transparency, and offer higher benefits and compensation. These features help attract highly skilled workers, which gives the company a stronger competitive advantage. However, it is not a good idea to blindly rely on the company's track record regarding corporate social responsibility. 

Fatmy has examined, whether CSR policies that support sexual minorities have an effect on the company's financial performance. The results show that LGBTQ friendliness has a positive effect on the profitability and value of US companies. The doctoral study also finds that LGBTQ-friendly companies are more innovative and produce more useful patents than other companies.  

The positive effects of CSR are influenced by local socio-political factors 

Local values may influence how socially responsible activities affect the bottom line. According to the dissertation, the effect of progressive LGBTQ policies on profitability and market value was weaker or non-existent for US companies headquartered in politically or religiously conservative regions. 

Demographic and cultural factors transform the effects of CSR on company performance and help determine the extent to which a company may engage in socially responsible practices. For instance, religiosity, factored in as both external influence from the community and internal firm culture, is positively associated with overall CSR. Specifically, firms that are more religious perform better when looking at product responsibility, emissions reductions, and responsible use of resources. 

Fatmy's doctoral research was conducted using a sample of publicly traded US firms. The effects of LGBTQ-friendliness on company performance have been studied during 2003–2016, and on innovation during 2003–2017. Religiosity’s effect on CSR was studied during 2012–2020, and the effects of CSR on COVID-19 layoffs were studied using data from 2012–2020. 

Dissertation 

Fatmy, Veda (2022) Essays on Corporate Social Responsibility and its Efficacy in Value Creation. Acta Wasaensia 493. Doctoral dissertation. Vaasan yliopisto / University of Vaasa. 

Public defence 

The public examination of M.Sc. Veda Fatmy’s doctoral dissertation ”Essays on Corporate Social Responsibility and its Efficacy in Value Creation” will be held on Friday 4.11.2022 at noon at the University of Vaasa, auditorium Kurtén. 
 
It is possible to follow the defence also online (Zoom, password: 777338) 
Professor Markku Kaustia (Aalto University) will act as the opponent and Professor Sami Vähämaa as the custos.