Founder impacts on family business's social responsibility efforts

Companies where the founder is still alive and involved in management are more likely to act in a socially responsible way than family businesses in their second generation or more, a study has found.

Lead author of the research John Bingham, associate professor of organisational leadership and strategy at Brigham Young University in the US, told CampdenFB that there was no link between the age of a business and social responsibility, but founder involvement did have an impact.

“When the founder is still alive – and involved in management – there is a greater likelihood that the family firm will be socially responsible, even more so than traditional family firms,” he said.

The study, which looked at 700 companies listed among the S&P 500 between 1991 and 2005, also found that family-controlled public companies are more socially responsible, particularly in areas such as the community and care of employees, than businesses where no members of the founder’s family is involved.

This is because family-controlled businesses see their stakeholders as partners, according to the study, which was published in the Journal of Business Ethics.

“What we find is that family firms are often more aware of issues surrounding their stakeholders because the founder has established a personal relationship with customers, or with a distributer, or a supplier, in addition to shareholders,” said Bingham.

Co-author Gibb Dyer, professor of organisational leadership and strategy at the university, said in a statement that families may also take a business’s responsibility personally.

“The name of the family is directly connected with the business so if the business does something to hurt the community or damage the environment, it tends to reflect badly on the family,” he added.

Being more socially aware can lead to good results in the long term, added Bingham.

“Good business practices and reasonable corporate social responsibility initiatives can go hand in hand. These are not necessarily mutually exclusive initiatives,” he said.