Responsible Investment

Quality of management is related to stakeholder relations

February 7, 2008
Image ‘Windows into Soul’ by Fernando de Sousa (CC BY-SA 2.0)

In their study “Finding the Link Between Stakeholder Relations and Quality of Management”, Waddock and Graves ran four regression models to test their hypothesis. “In all four models, the relationship between quality of management and treatment of owners (measured by financial performance), employee relations, and product (the surrogate for customer relations), is strongly and consistently positive. Community relations is significantly and positively related to quality of management in two of the models, suggesting some support for this relationship. Treatment of the ecological environment, however, is not significantly related to quality of management in any of the models.”

In conclusion, the authors suggest that a new definition of corporate social performance “should support the understanding that "doing good" by stakeholders, i.e., treating them well in an on-going, operational way, may be the best way to build not only successful financial performance but overall organizational performance as well.” And, “For managers, the findings presented above may indicate that a broader conception of their responsibilities may be necessary if they are to enhance shareholder wealth.”

This paper won the 1997 Moskowitz Prize competition, awarded by the Social Investment Forum. The Moskowitz Prize, which in 2004 became an initiative of the Center for Responsible Business at the University of California, Berkeley, promotes the concept, practice, and growth of socially responsible investing.

References

This article may be reproduced according to our terms of use with attribution (and link, if online) to www.tias.edu. To be cited as: “Quality of management is related to stakeholder relations”, Lloyd Kurtz, and Ingrid Ramaan, www.tias.edu, February 7, 2008.

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Research Paper

Author(s)

Ingrid Ramaan
Administrative Editor FSinsight

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