Responsible Investment

Evidence for ‘virtuous circle’: CSP and profitability

February 7, 2008 | 1 min read
Image ‘Around and Around We Go’ by peasap (CC BY 2.0)

In their 1997 study, “The Corporate Social Performance-Financial Performance Link”, Waddock and Graves have constructed an index of CSP (as proposed by Ullman, 1985)[1], based on the eight corporate social performance attributes rated consistently across the entire S&P 500 rating by KLD at the time. They find numerous significant relationships between CSP behaviors and profitability measures such as return on assets (ROA) and return on sales (ROS), which is particularly interesting with respect to Clayman (1987)[2].

The authors argue that corporate social responsibility and slack resource availability are correlated, a finding that is highly relevant in light of Myers (1984)[3]. They write, “Thus, in support of what we termed the ‘good management theory’, firms may also ‘do well by doing good’.” Waddock and Graves add, “There may be a simultaneous and interactive impact, possibly forming what we earlier termed a virtuous circle.”


  1. Ullmann, Arieh A. “Data in Search of a Theory: A Critical Examination of the Relationships Among Social Performance, Social Disclosure, and Economic Performance of U. S. Firms.The Academy of Management Review 10, no. 3 (July 1, 1985): 540–557.
  2. Clayman, Michelle. “In Search of Excellence: The Investor’s Viewpoint.Financial Analysts Journal 43, no. 3 (May 1987): 54–63.
  3. Myers, Stewart. “The Capital Structure Puzzle.Journal of Finance 39, no. 3 (July 1984): 575-592.

This article is derived from a previously published article on, February 7, 2008.

This article may be reproduced according to our terms of use with attribution (and link, if online) to To be cited as: “Evidence for ‘virtuous circle’: CSP and profitability”, Sandra Waddock, Samuel Graves,, July 6, 2012.

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