Social Responsibility and Diversity: Connecting the Dots

What is the number one goal of a corporation? Flip open any MBA textbook and the “right” answer is obvious: profit maximization. But is it really so simple?

March 15, 2012
by Rachel Soares

If companies haven’t turned their ears to the Occupy Wall Street protestors yet, they should. The growing movement reflects an important trend in public opinion: 71% of Americans report an unfavorable impression of Wall Street and large corporations. It’s clear that while companies need to make money to survive, profit maximization, without regard to consequences or risks, is not a strategic business practice.

Cue Corporate Sustainability

Through its focus on stakeholder relations, a key tenet of corporate sustainability is CSR, or corporate social responsibility — a consideration of the organization’s impact, both positive and negative, on the world. Companies committed to CSR pay more than lip service to their stakeholders, looking beyond the interests of quick-buck investors. They are positioned for long-term growth.

CSR isn’t just a passing fad. A company’s CSR activities are a visible way to judge their values. An easily investigated metric — something that Catalyst measures for every Fortune 500 company each year — is the representation of women in senior leadership. The joint Catalyst and Harvard Business School authored study, Gender and Corporate Social Responsibility: It’s a Matter of Sustainability, shows that companies and society win when business leaders are gender diverse.

The study found that across a 10-year period, companies with more women board directors and more women corporate officers donated significantly more charitable funds than their less-diverse peers. Each additional woman board director translated to an added $2.3 million in annual philanthropic giving. In addition, for every percent increase in woman corporate officers, companies gave an additional $5.7 million.

These findings can’t be explained away by factors other than gender-diverse leadership. Women leaders still had a significant positive effect after controlling for financial performance, company size, and industry. While this could be a case of the chicken vs. the egg, other research suggests that diverse leaders are employed before increases in CSR are observed.
Why might this be? Catalyst believes that operating with gender-inclusive leadership can provide diverse perspectives on fairness, which may broaden the company’s understanding of CSR and lead to greater philanthropy. 

Obviously, CSR isn’t just about the quantity of philanthropic donations. The quality of initiatives is important too. It can be speculated that when leaders spotlight gender issues in their CSR strategies, for example focusing on the importance of women as customers and suppliers, they often position their organization for sustained growth, and the payoff extends beyond the company to society at large.

So the next time you are looking to invest, make a purchase, or take a job offer, consider the gender diversity of the company’s leadership. It might point you to a company that pays attention to its stakeholders, and not just the next quarter’s balance sheet.

Rate this article 5 (excellent) to 1 (poor). Send your responses here.

Rachel Soares conducts research on women in leadership and the business case for diversity. She oversees the annual Catalyst Census reports of the Fortune 500 and Financial Post 500. She has extensive experience working with quantitative and qualitative research methods in leadership, organizational change and effectiveness, and work-family contexts.

Catalyst, founded in 1962, is a nonprofit membership organization expanding opportunities for women and business. With offices in the United States, Canada, Europe, and India, and more than 500 preeminent corporations as members, Catalyst is the trusted resource for research, information, and advice about women at work. Catalyst annually honors exemplary organizational initiatives that promote women's advancement with the Catalyst Award. Learn more about our work and download Catalyst reports.