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October 28, 2009
Stanford Professor Receives 2009 Moskowitz Prize
    by Robert Kropp

The annual prize for outstanding quantitative research in socially responsible investing is awarded to David P. Baron, Professor of Political Economy and Strategy at Stanford.

The 2009 Moskowitz Prize for Socially Responsible Investing, announced at this week's SRI in the Rockies conference, has been awarded to David P. Baron, Professor of Political Economy and Strategy at Stanford.

Launched in 1996 by the Social Investment Forum (SIF), the Moskowitz Prize "is the only global award recognizing outstanding quantitative research in the field of socially responsible investing (SRI)," according to the Haas School of Business at the University of California, Berkeley.

Baron's paper, co-authored by Maretno A. Harjoto and Hoje Jo, is entitled The Economics and Politics of Corporate Social Performance. In the paper, Baron examines the relationships between corporate financial performance (CFP), corporate social performance (CSP), and social pressure, during the last four years of the Clinton administration and the first four years of the Bush administration.

In his introduction, Baron cites a January, 2008 survey by the Economist Intelligence Unit (EIU), in which more than half of responding companies indicated that corporate social responsibility (CSR) "is a necessary cost of doing business," and "gives us a distinctive position in the market." Distinguishing between CSR, which involves a moral responsibility to undertake social activities, and CSP, which can be either strategic or responsive to social pressure, Baron found that CSP increases in response to social pressure.

In fact, Baron found, "Social pressure is greater the higher is CSP and the worse is CFP," which suggests that private political activities undertaken by non-governmental organizations (NGOs) and social activists prefer to target "soft firms," or companies that are unlikely to resist their demands.

Baron also found that the rewards for increased CSP may be greater among consumer industries than industrial industries, suggesting that companies that sell directly to consumers may derive benefits that companies selling to other companies do not.

Despite "the absence of an empirical relation between financial performance and social performance," Baron's research found a greater increase in social pressure and a more negative effect of social pressure on CFP during the first four years of the Bush administration than during the final four years of the Clinton administration. In fact, according to the study, "the negative effect of social pressure on CFP is due to the Bush years."


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