I recently published a study in the Journal of Corporate Law Studies examining whether Australian shareholders actually support corporate social responsibility (CSR) or if they’d rather companies focus solely on maximising profits. You can read the full article here:
My research was sparked by the debate around corporate Australia’s support for the Voice to Parliament referendum. When many big companies like Wesfarmers, Commonwealth Bank, and BHP made donations to the “Yes” campaign, Shadow Treasurer Angus Taylor suggested companies should “stick to their knitting” – basically arguing they should focus on maximising shareholder value rather than wading into social or political issues.
I wanted to see if shareholders agreed with Taylor’s view, so I surveyed 236 Australians with investing experience. I asked them how much profit they’d be willing to give up to support four different social causes: gender diversity, income equality, environmental protection, and faith-based values.
What I found
The results suggest that most Australian investors do indeed prefer companies to focus on maximising profits. While investors were generally willing to give up some profit for CSR activities, the amounts were typically quite small.
On average, investors in my study were willing to forgo:
- About 29% of potential returns for environmental protection
- 24% for income equality
- 14% for gender diversity
- Only 9% for faith-based values
But these averages were skewed by a small number of more generous investors. Looking at the median values tells a different story – more than half of investors weren’t willing to give up even $10 from a potential $1000 return to support gender diversity or faith-based values.
About 27% of investors weren’t willing to sacrifice any amount for any of the four social causes, which suggests quite strong support for the view that companies should stick to making money.
One of the most interesting findings was that people were much more generous when making consumer or donation decisions than investment decisions. When facing identical scenarios framed as purchasing or donation choices rather than investments, participants were willing to give up significantly more money.
This suggests that many shareholders might prefer companies to distribute returns directly to them, allowing investors to support social causes through their own purchasing and donation decisions if they wish.
While Australian law gives company directors broad discretion to consider stakeholder interests when determining what’s best for the company, my research suggests many shareholders would rather see a focus on financial returns.
What do you think? Should companies stick to their knitting, or do they have a responsibility to support social causes?
