Date of this Version
Cornhusker Economics, January 26, 2022
A recent report finds that 86% of Americans expect for-profit companies to be active in addressing social and environmental issues (Porter Novelli/Cone 2019). In addition to benefiting society, engagement in prosocial behavior, known as corporate social responsibility (CSR), can improve a firm’s competitiveness and economic performance. Engagement in proactive CSR can enhance a firm’s relationship with the public by building its reputation of being a trustworthy, credible and responsible citizen. Studies have argued that the reputation firms develop through CSR activities can provide ‘insurance-like’ protection from future negative publicity and attacks on the firm (Godfrey et al. 2009; Gardberg and Fombrum 2006). However, firms engaging in CSR practices may choose to exploit public trust by engaging in fraudulent behavior, which often takes the form of making false or misleading claims about their product quality and/or production practices.