Buying CSR with employees’ pensions? The effect of social responsible investments on Norwegian SMEs’ choice of pension fund management

Abstract

PurposeEmployees often expect an emphasis on financial aspects to be predominant when their employers choose a fund management company for the investment of employees' pension fund deposits. By contrast, in an attempt to appear as socially responsible company managers may emphasize social responsibility in pension fund choices. This study examines to what extent managers for small and medium sized companies emphasize social responsibility (SR) vs. expected returns when choosing investment managers for their employees' pension funds. Design/methodology/approachA conjoint experiment among 276 Norwegian SMEs' decision makers examines their tradeoffs between social and financial goals in their choice of employees' pension management.Furthermore, the study examines how the companies' decision makers' characteristics influence their pension fund management choices. FindingsThe findings show that the employers placed the greatest weight to suppliers providing funds adhering to socially responsible investment (SRI) practices, followed by the suppliers' corporate brand credibility, the funds' expected return, and the suppliers' management fees.Second, employers with investment expertise emphasized expected returns and downplayed social responsibility in their choice, whereas employers with stated CSR-strategies downplayed expected return and emphasized SR. Originality/valueChoice of supplier to manage employees' pension funds relates to a general discussion on whether companies should do well -maximizing value, or do good, -maximizing corporate social responsibility. In this study, doing well means maximizing expected returns and minimizing costs of the pension investments, whereas doing good means emphasizing SRI in this choice. Unfortunately, the employees might pay a price for their companies' ethicality as moral considerations may conflict with maximizing the employees' pension fund value.

Corporate Social Responsibility (CSR) by small and medium enterprises (SMEs): a systematic review

“…Although not common, external donors may sometimes motivate SMEs to participate in CSR (Coppa & Sriramesh, 2013). Socially responsible SMEs also encourage other companies to participate in CSR, this is because they restrict their business activities to only socially responsible companies (Biong & Silkoset, 2017).…”

Socially responsible investment: An analysis of the structure of preferences of savers

“…From the study, one can also conclude that the structure of preferences is not homogeneous for all savers and it is possible to distinguish four broad segments formed by individuals with a different preference structure. Segments more prone to SRI are obtained, as was the case in the studies by Berry and Yeung (), García et al (), and Biong and Silkoset ().…”

“…And, the study by Biong and Silkoset () focuses on Small and Medium‐sized enterprises (SMEs') choice of pension fund management for their employees' occupational pension deposits. The findings show that the employers placed the greatest weight on suppliers providing funds adhering to SRI practices, followed by the suppliers' corporate brand credibility, the funds' expected return, and the suppliers' management fees.…”

“…As far as we are aware, it has not yet been used to analyse the opening of savings products such as deposits. In addition, the aspects of social responsibility have been analysed very little in previous research (Berry & Yeung, ; Biong & Silkoset, ; García et al, ).…”

Corporate Social Responsibility and Performance in SMEs: Scientific Coverage

“…Graafland [205]; Biong and Silkoset [206]; Toppinen et al [207]; Hossain et al [208]; Scagnelli et al [209]; Del Baldo [210]; Dincer and Dincer [211]; Choi et al [212]; Ellerup Nielsen and Thomsen [30]; Koričan and Jelavić [213]; Schoenberger-Orgad and McKie [214]; Riedl [215]; Sarbutts [216], among others.…”