Does it pay to be ethical?

From the Wall Street Journal:

The link can be found at the end of this entry.


Summary:

Article attempts to answer these questions:

Will buyers actually reward good corporate behavior by paying more for products -- and will they punish irresponsible behavior by paying less? If so, how much? And just how far does a company really need to go to win people over?

So the writers conducted a test. Two groups. One group was given information about if goods were made ethically or unethically. Second group (control group) -- no information was given.

Results:
...
consumer attitudes played a big part in shaping those results. People with high standards for corporate behavior rewarded the ethical companies with bigger premiums and punished the unethical ones with bigger discounts.

Finally, we discovered that companies don't necessarily need to go all-out with social responsibility to win over consumers. If a company invests in even a small degree of ethical production, buyers will reward it just as much as a company that goes much further in its efforts.

Strengths of the Article

Actually conducted an experiment! That is cool. I don't care much if it's statistically robust. Very cogent argument.

Weaknesses of the article:

Author inaccurately substitutes the term "social responsibility" for "ethics". The article title is misleading -- perhaps for sensationalism. He does, however, specify what category of ethics the scope of his study assesses

For our purposes, "ethically produced" goods are those manufactured under three conditions. First, the company is considered to have progressive stakeholder relations, such as a commitment to diversity in hiring and consumer safety. Second, it must follow progressive environmental practices, such as using eco-friendly technology. Finally, it must be seen to demonstrate respect for human rights -- no child labor or forced labor in overseas factories, for instance.

Also, the study only examines one industry: manufacturing.

Weakens the argument significantly, but still an interesting read. It's kind of like reading Consumer Reports.

http://online.wsj.com/article/SB121018735490274425.html