CORVALLIS, Ore. – Ownership in publicly held businesses by long-term institutional owners, such as pensions, generally exhibit higher levels of corporate social responsibility, according to a new study by an Oregon State University researcher.

Don Neubaum, an assistant professor of management in the College of Business at OSU, published his research in a recent edition of the Journal of Management.

Neubaum said scandals in recent years at companies such as Enron and WorldCom have raised concerns among shareholders and corporate governance watchdogs. Neubaum and co-author Shaker Zahra from the University if Minnesota looked at data collected in 1990-95 and 1995-2000 from Fortune 500 firms.

Neubaum said while past studies in this area have examined the volume or percentage of a firms’ stock held by all institutional owners on a company’s social performance, few, if any, prior studies have considered the effects of different classes of institutional owners (e.g. mutual funds vs. pension funds, or passive or active institutional owners).

The results were striking. Neubaum said long-term ownership (i.e. pension funds) was positively associated with a company’s corporate social responsibility. In contrast, a higher level of short-term ownership (i.e. mutual funds and investment banks) was negatively associated with a company’s social responsibility.

“Mutual funds tend to jump in and out funds frequently, so there is more pressure to generate a quick return,” Neubaum said. “A pension holder, on the other hand, is more likely to buy a stock and hold on to it for a longer time. They tend to be more active in the company, feel more invested, and therefore, are more likely to be concerned with a company’s social performance.”

Corporate social responsibility was measured in six ways: employee relations, the environment, community relations, product characteristics, treatment of women, and treatment of minorities. In both the 1995 and 2000 data, Neubaum said long-term institutional owners had more positive impact on their companies’ performance in those areas than short-term institutional owners.

“We find that while the majority of institutional shareholders are passive, at least publicly, the more active they become, the more they positively impact a company’s social responsibility,” he said. “In addition, it’s interesting to note that in the last decade institutional shareholders have taken on larger roles as activists in companies, and this seems to be associated with more progressive social practices within publicly held firms.”

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Don Neubaum,