Research summary: Raters of firms play an important role in assessing domains ranging from sustainability to corporate governance to best places to work. Managers, investors, and scholars increasingly rely on these ratings to make strategic decisions, invest trillions of dollars in capital, and study corporate social responsibility (CSR), guided by the implicit assumption that the ratings are valid. We document the surprising lack of agreement across social ratings from six well-established raters. These differences remain even when we adjust for explicit differences in the definition of CSR held by different raters, implying the ratings have low validity. Our results suggest that users of social ratings should exercise caution in interpreting their connection to actual CSR and that raters should conduct regular evaluations of their ratings. Managerial summary: Ratings of corporate social responsibility (CSR) guide trillions of dollars of investment, but managers, investors, and researchers know little about whether these ratings INTRODUCTIONHow much do we really know about corporate social responsibility (CSR)? Though many managers, investors, and scholars have embraced this concept, the ratings most often used to assess CSR have rarely been evaluated. If these ratings are invalid, then trillions of dollars of capital is Keywords: corporate social responsibility; ratings; corporate governance; socially responsible investing; performance measurement *Correspondence to: Aaron K. Chatterji, Fuqua School of Business, Duke University, 1 Towerview Road, Durham, NC 27708, U.S.A. E-mail: ronnie@duke.edu Copyright © 2015 John Wiley & Sons, Ltd. potentially being misallocated and numerous academic findings may also not be valid.In this study, we assess the convergent validity (that is, agreement) of six well-established social ratings. We find that these raters exhibit low convergence in their assessments of CSR. 1 This lack of agreement is not just due to announced differences in raters' theorization of CSR; for example, if they measure performance relative to an industry 1 When discussing the behavior of raters, we use the term convergence. When referring to the rating they provide, we use the term convergent validity. We do not wish to imply that convergence implies a particular time trend. We apply this term to describe overlap across ratings systems at a particular point in time. A. Chatterji et al.group or in absolute terms. Instead, the low agreement implies all or almost all of the ratings have low validity. This result has important implications for managers, investors, and researchers who use these ratings.Many managers spend significant time and resources on CSR activities. For example, analysts claim that nearly every Fortune 500 company releases some kind of sustainability report.2 Eight thousand firms have signed the UN Global Compact as a sign of their commitment to CSR.3 As CEOs and other top managers respond to growing pressure from multiple stakeholders over social issues (Bansal and Roth, 2000;Crilly...

Ratings of corporations' environmental activities and capabilities influence billions of dollars of "socially responsible" investments as well as some consumers, activists, and potential employees. In one of the first studies to assess these ratings, we examine how well the most widely used ratings-those of Kinder, Lydenberg, Domini Research & Analytics (KLD)-provide transparency about past and likely future environmental performance. We find KLD "concern" ratings to be fairly good summaries of past environmental performance. In addition, firms with more KLD concerns have slightly, but statistically significantly, more pollution and regulatory compliance violations in later years. KLD environmental strengths, in contrast, do not accurately predict pollution levels or compliance violations. Moreover, we find evidence that KLD's ratings are not optimally using publicly available data. We discuss the implications of our findings for advocates and opponents of corporate social responsibility as well as for studies that relate social responsibility ratings to financial performance.

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Ratings of corporations' environmental activities and capabilities influence billions of dollars of "socially responsible" investments as well as some consumers, activists, and potential employees. In one of the first studies to assess these ratings, we examine how well the most widely used ratings-those of Kinder, Lydenberg, Domini Research & Analytics (KLD)-provide transparency about past and likely future environmental performance. We find KLD "concern" ratings to be fairly good summaries of past environmental performance. In addition, firms with more KLD concerns have slightly, but statistically significantly, more pollution and regulatory compliance violations in later years. KLD environmental strengths, in contrast, do not accurately predict pollution levels or compliance violations. Moreover, we find evidence that KLD's ratings are not optimally using publicly available data. We discuss the implications of our findings for advocates and opponents of corporate social responsibility as well as for studies that relate social responsibility ratings to financial performance.