Corporate Social Responsibility is Good for Business

Published: March 12, 2013

UW Bothell assistant professor Ying Li teaches traditional finance classes in the School of Business while also exploring how institutional investment firms can be more sustainable and benefit from corporate social responsibility (CSR). “I am interested in institutional investors, like hedge funds and mutual funds,” she says. “I investigate their risk-taking behavior and explore how it is related to incentives from their compensation contracts.”

On campus, Li emphasizes the complex nature of financial management. She says on the one hand, the goal of financial management is to maximize existing shareholder value. But more and more research is showing that to maximize their long-term value, firms need to satisfy all of their stakeholders. “This is much broader than shareholders alone,” she says.

Li also focuses on ethics in finance with students. “We discuss the consequences of earnings management, insider trading, ignorance of fiduciary duties, etc. in class,” she says.

As a researcher, Li’s work has appeared in numerous academic journals. In a recent Journal of Business Ethics article, she and her co-authors found that firms with a higher level of operational diversity (workers, contractors and managers from diverse backgrounds), are more likely to engage in corporate giving.

Her current research project investigates how corporate social responsibility helps firms be successful. “We find that institutional CSR, like giving to the community; leads to lower stock volatility at the firm,” she says. “Hence, institutional CSR provides an ‘insurance-like’ protection.”

Li’s focus on ethics is in accord with other recent activities at the UW Bothell business school. Last October, the school joined the Principles for Responsible Management Education Initiative (PRME).

Launched at the 2007 UN Global Compact Leaders Summit in Geneva, the principles provide an engagement framework for academic institutions to advance corporate sustainability and social responsibility through the incorporation of universal values into curricula and research.

“Our students need a firm understanding of ethical issues in business,” says Phil Palm, assistant director at the UW Bothell School of Business. “A business doesn’t just have to comply with the law, it should think about how to create value in the long run.”