The impact of ownership on building sustainable and responsible businesses

Abstract

This article reviews what we know and do not know about the impact of ownership on building sustainable and responsible businesses. It begins by analysing why firm owners are an important driver of responsible business behaviour, and reviews whether such behaviour comes at a financial cost to owners or not. It then discusses how owners drive responsible business behaviour as compared to other stakeholders, reviewing the empirical evidence about the impact of different owner types on various forms of responsible business.My review shows that there is a fair amount of research about certain topics, such as the relation betweeen financial and social performance and about the social and enviromental impact behaviour of the two most prevalent types of owners of public corporations-families and institutional investors-although the cumulative evidence on those topics is far from conclusive. Moreover, there are also a number of gaps in our knowledge that warrant further research to inform recommendations to business leaders and policy makers. These include the relative effectiveness of different types of owners, stakeholders, and organisational forms at building sustainable and responsible businesses; the impact of the recent evolution of capital markets on CSR behaviour; and the social snd enviromental impact of the state, foundations, and employees as owners of corporations. EXECUTIVE SUMMARYEquity ownership of corporations is a critical factor in building sustainable and responsible businesses. The paper sets out to review previous studies of this relationship and adopts a multidisciplinary approach to identify gaps in the understanding of how ownership has an impact on business practices and policies.

Ownership Structure and Firm Performance

“…However, the performance of these kinds of firms cannot be measured by accounting performance ratios alone. Short and Rashid et al, (2016) also studied the relationship between ownership structure and firm performance using the market value of stock at book value and return on shareholder's equity as a measure of firm performance and they found the results to be consistent with the previous regressions by Villalonga et al,( 2018). Shahveisi et al, (2017) found empirical evidence showing that endogeneity is an issue in ownership structure.…”

“…Shahveisi et al, (2017) found empirical evidence showing that endogeneity is an issue in ownership structure. Further evidence for the relationship between endogeneity and ownership structure was provided by Villalonga et al, (2018). Al-Malkawi et al, (2018) came up with an estimation model using a simultaneous equation employing cross-sectional data to evaluate the positive impact on Tobin's Q resulting from executive equity ownership.…”

How to Lead the Board of Directors to a Sustainable Development of Business with the CSR Committees

“…Previous researches highlighted different approach toward the BoDs sustainability commitment depending on the ownership characteristics [93], because different owners are characterized by different goals, and time horizons being interested in longer or shorter-term investments, and different risk exposures [94][95][96][97][98].…”

The Future of the Corporation and the Economics of Purpose

“…Credible commitment to corporate purpose, therefore, requires identification of corporate ownership that promotes and supports its fulfilment (Villalonga, 2018)). An example of this, commonplace in Denmark and Germany, are ‘industrial foundations’, which are foundations and trusts that are not simply philanthropic in nature, but also own companies (Børsting and Thomsen, 2017), such as Bertelsmann, Bosch, Carlsberg, Ikea, Tata, and Velux.…”