Socially Responsible Investment: Explaining its Uneven Development and Human Resource Management Consequences

• Published date: 01 May 2008
• DOI: http://doi.org/10.1111/j.1467-8683.2008.00676.x
• Author: Peter Waring,Tony Edwards
• Date: 01 May 2008

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Socially Responsible Investment: Explaining its

Uneven Development and Human Resource

Management Consequences

Dr. Peter Waring* and Dr. Tony Edwards

ABSTRACT

Manuscript Type: Conceptual

Research Question/Issue: In this paper we address two research questions. First, to what extent has Socially Responsible

Investment (SRI) developed unevenly across countries with different corporate governance systems and how might we

explain this? Second, what consequences does its uneven development have for human resource management (HRM)?

Research Findings/Insights: We map the nature and extent of SRI equities across five industrialized countries – Germany,

Japan, the UK, the US and Australia. We find that differences between the institutional, corporate governance and cultural

characteristics of national business systems explain variations in the size and significance of SRI across countries. We also

find that SRI has an impact on HRM in institutional contexts such as where its influence is complemented by strong

employee voice institutions.

Theoretical/Academic Implications: The notion of “institutional complementarities,” within and across spheres of a

corporate governance system is a useful theoretical lens for understanding the varied impact of SRI across different

corporate governance systems. Further, future studies of HRM will need to consider the heterodox pressures produced by

SRI that may influence its conduct.

Practitioner/Policy Implications: Implications for SRI fund managers are considered, especially how they might use the

notion of institutional complementarities to help in their investment decisions and in the impact they can exert. Specifically

SRI funds are likely to be more effective where they can form alliances with other existing bodies or where they spur the

development of such bodies. The implications for other actors in HRM and corporate governance are also considered.

Keywords: Socially responsible investment, corporate social responsibility, human resource management

INTRODUCTION

Socially Responsible Investment (SRI), defined as invest-

ments that incorporate social, environmental or ethical

criteria (e.g., labor standards) as well as financial objectives

(Waring, Burgess and Lewer, 2006), has been labeled by

Sparkes (2002) as a “global revolution.” There is widespread

empirical evidence of growing interest and participation in

SRI debt and equity instruments (Waring and Lewer, 2004).

Socially responsible investors are not purely focused on

maximizing shareholder value, but rather demonstrate

concern for deploying their investments to encourage

improvements to the environment, social issues, and the

governance of the firm. Return on investment is not the

overriding concern of SRI although it is an important aim.

From humble beginnings as an investment philosophy

championed in the main by Christian Churches, SRI has

grown in popularity and size and is widely considered to be

a positive force within global capital markets and a key

driver of Corporate Social Responsibility (CSR) (Michelson,

Wailes, van der Loan and Frost, 2004; Sparkes and Cowton,

2004). There is now a significant body of finance literature

that has assessed the financial returns of SRI and the profile

of SRI investors (Benson, Brailsford and Humphrey, 2006;

Hellsten and Mallin, 2006); however, there is very little

research that has investigated international variations in the

size of SRI or considered what impact SRI may have on one

of its key concerns – the management of labor.

Socially Responsible Investment is of considerable

interest to corporate governance observers as it represents

*University of Newcastle (Singapore Campus), 355 Jalan Bukit Ho Swee, Singapore

169576. E-mail: peter.waring@newcastle.edu.au

SOCIALLY RESPONSIBLE INVESTMENT 135

Volume 16 Number 3 May 2008

© 2008 TheAuthors

Journal compilation © 2008 BlackwellPublishing Ltd

doi:10.1111/j.1467-8683.2008.00676.x