The Primary Importance of Corporate Social Responsibility and Ethicality in Corporate Reputation: An Empirical Study

• Published date: 01 March 2014
• Author: Bruno Dyck,Kent Walker
• Date: 01 March 2014
• DOI: http://doi.org/10.1111/basr.12028

The Primary Importance

of Corporate Social

Responsibility and Ethicality

in Corporate Reputation:

An Empirical Study

KENT WALKER AND BRUNO DYCK

ABSTRACT

We examine three assumptions commonly held in the

corporate reputation literature: (1) reputation ratings of

owners and investors are generally representative of all

stakeholders; (2) stakeholders will generally provide a

higher reputation rating to firms that emphasize corpo-

rate social responsibility versus firms that do not; and (3)

profitability is the primary criterion of importance to all

stakeholders when rating a firm’s reputation. Using an

exploratory in-class exercise, our findings suggest that:

(1) there are significant differences among stakeholder

groups in their reputation ratings; (2) firms that empha-

size corporate social responsibility are not rated more

highly across all stakeholder groups; and (3) for all

stakeholder groups, the ethicality criterion explained

Kent Walker is Assistant Professor, Odette School of Business, University of Windsor, Windsor,

ON, Canada. E-mail: kentwalk@uwindsor.ca. Bruno Dyck is Professor, I.H. Asper School of

Business, University of Manitoba, Winnipeg, MB, Canada. E-mail: bdyck@ms.umanitoba.ca.

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Business and Society Review 119:1 147–174

© 2014 Center for Business Ethics at Bentley University. Published by Wiley Periodicals, Inc.,

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more of the variance in firms’ reputation ratings than the

profitability criterion.

INTRODUCTION

Reputation has not only been described as an organiza-

tion’s most important intangible asset (Hall 1993) but

also as “the single most valued organizational asset”

(Gibson et al. 2006, p. 15). Researchers have repeatedly found a

link between reputation and organizational performance (Brown

and Perry 1994; Deephouse 2000; Fombrun and Shanley 1990).

A good reputation can lead to numerous strategic benefits such

as lowering firm costs (Deephouse 2000; Fombrun 1996),

enabling firms to charge premium prices (Deephouse 2000;

Fombrun 1996; Fombrun and Shanley 1990; Rindova et al.

2005), creating competitive barriers (Deephouse 2000; Fombrun

1996; Milgrom and Roberts 1982), increasing profitability

(Roberts and Dowling 2002), and attracting new members

(Fombrun 1996; Turban and Greening 1997), investors

(Srivastava et al. 1997), and customers (Fombrun 1996). Simply

put: “Reputations are rent-producing assets—they create wealth”

(Fombrun 1996, p. 387).

Despite the importance of and the increasing number of studies

that examine corporate reputation (Barnett et al. 2006), ongoing

concerns and challenges continue to plague the field, particularly

with regard to defining and operationalizing the construct (Mahon

2002; Walker 2010; Wartick 2002). The purpose of this article is

to empirically test some implicit assumptions evident when cor-

porate reputation is defined as the amalgamation, that is an

organization’s “overall appeal,” for all stakeholders encompassing

all criteria (Fombrun 1996, p. 72), especially when the ratings to

measure this amalgamation are provided by owners and inves-

tors. Although this amalgamation approach is the most common

way to measure corporate reputation in the literature, it has

several notable shortcomings.

First, an amalgamation approach ignores the fact that different

stakeholders are likely to use differing—often self-serving—criteria

in their reputation evaluations (Rindova et al. 2005; Sjovall and

148 BUSINESS AND SOCIETY REVIEW