"Family Control and Corporate Social Responsibility" Rewarded!

An article coauthored by Professor Sadok El Ghoul received the award for Best Conference Paper at the World Business Ethics Forum held in late 2016 in Hong Kong.

Sophie Muller - 17 January 2017

"It is nice to receive an award once in a while," stated Sadok El Ghoul, a Professor in Business Administration at Campus Saint-Jean. "I see this award as further encouragement to continue working on a topic as important as corporate social responsibility."

A concept developed in the 1960s, corporate social responsibility (CSR) consists, for a business, of integrating social and environmental concerns into its activities and its interactions with other stakeholders. What originally led Professor El Ghoul to pursue research into CSR was that the scientific community did not seem to be clearly identifying its effects on business performance.

"At the time, the dominant idea was that a business that spent on CSR could suffer as a result, as its socially irresponsible competitors would end up taking away from its market shares," Sadok El Ghoul explained. "However, my work shows that socially responsible businesses have lower financing costs, particularly due to a broader base of investors and lower risk."

This instructor of finance, international trade and econometrics also said he spends part of his international trade course on business ethics: "I introduce several theories, such as the theory of rights, utilitarianism, the theory of justice, etc., that help in judging whether an action is ethical."

For the first time in his career, Professor El Ghoul attended the World Business Ethics Forum, the 5th edition of which was held on December 11-13, 2016. Founded jointly by the University of Macau and the Hong Kong Baptist University in 2006, the forum brings together speakers from several countries every two years to discuss new ideas related to business ethics.

Titled "Family Control and Corporate Social Responsibility", the article submitted for discussion by Dr. El Ghoul examines the determining factors of CSR, and more specifically the structure of business ownership. Written in collaboration with Omrane Guedhami and Chuck C. Y. Kwok of the University of South Carolina, and He Wang of Renmin University of China, the articles asks the following question: Do family businesses perform better in terms of CSR than other types of businesses?

The research conducted by Professor El Ghoul in nine East Asian countries shows that they do not. The social and environmental performance of family businesses in those countries is mediocre. This is due in large part to the fact that many families exercise effective control of businesses with relatively little ownership rights. The separation of control and ownership allows those families to be more opportunistic toward shareholders and other business stakeholders (employees, environment, community, etc.).

"You can compare it to a situation where you control something, but you are not the sole owner of it," Sadok El Ghoul explained. "You may be tempted to use that thing to get rich at the expense of the other stakeholders."

The article's other interesting conclusion is that the performance of those family businesses in terms of CSR deteriorates even further when the institutions in the country in which they operate are fragile. Does that means that corporate social responsibility is only exercised if there is some social pressure? "Yes," replied Professor El Ghoul. "The poor social and environmental performance of family businesses is more pronounced when the machinery of governance is relatively ineffective. This can include internal mechanisms such as a board of directors, or external mechanisms such as the media."

The article sheds light not only on CSR, but also on how family businesses function and the importance of the institutional environment in conducting business. Dr. El Ghoul's work does not stop there either, as he shows, in new research to be available in a few weeks, that businesses can use CSR as an insurance policy during periods of financial difficulty.

"That is a key theme that fascinates me more and more," Professor El Ghoul stated. It is also a subject that private actors can no longer ignore, given how interdependent today's world has become. "Think of peace and working conditions in some industries," he added, "of the issue of diversity, pollution and climate change problems, respect for human rights, etc. Ultimately, the well-being and the very survival of the human race depend on CSR."

The article is available at: