Business and Society

The wages of social responsibility

March 10, 2008 | 1 min read

For the analysis of positive companies, the authors Meir Statman (Santa Clara University) and Denys Glushkov (Barclays Global Investors) develop a list of companies with high social responsibility scores (KLD data) in the areas of community, diversity, employee relations, environment, and products. Each company is scored using a summation of strengths minus weaknesses. The highest-scoring company (year-end 2006) was Hewlett-Packard with +12, the low was Wal-Mart at -9. The average company on the DS400 (formerly the Domini Social Index) had a score of +0.65 as compared with -1.55 for the S&P 500.

Of 2,955 companies reviewed, the authors find 198 ‘shunned’ companies, “namely those with one or more concern indicators relating to tobacco, alcohol, gambling, firearms, military or nuclear.”

Returns are evaluated over the 1992-2007 time period using CAPM, a three-factor (Fama/French) model, and a four-factor (Carhart) model. “We find, in general, that stocks of companies with high social responsibility scores provided higher returns than those of companies with low scores... The higher returns of companies with high scores are especially evident in a long-short portfolio of companies that are ‘top overall’ and ‘bottom overall’.” But the authors also confirm and extend the finding of Hong and Kacperczyk (2006) that sin stocks have outperformed historically. This was statistically significant in the CAPM and three-factor models, but not in the four-factor model.

These findings, the authors conclude, are “consistent with a world where the social responsibility feature of stocks is not priced. But it is also consistent with the world we find, where return advantages of some social responsibility criteria are offset by return disadvantages of other social criteria.”

This paper won the 2008 Moskowitz Prize competition (awarded by the Center for Responsible Business at the Haas School of Business, in cooperation with the Social Investment Forum, the Moskowitz Prize promotes the concept, practice, and growth of socially responsible investing).


This article was previously published on, March 10, 2008.

This article may be reproduced according to our terms of use with attribution (and link, if online) to To be cited as: “The wages of social responsibility”, Lloyd Kurtz,, March 10, 2008.

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Research Paper


Meir Statman
Glenn Klimek Professor of Finance, Santa Clara University

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