Executive Summary Verschoor A Study of The Link Between a Corporation s Financial 1 Essay

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A Study of The Link Between a Corporation’s Financial
Performance and Its by Curtis C. Verschoor
Commitment to Ethics Journal of Business Ethics 17: 1509–1516, 1998.

Executive Summary

ABSTRACT. A number of studies have tested the relationship between a corporation’s social and ethical performance and its financial performance. In contrast, this is the first study to demonstrate a link between overall financial performance and an emphasis on ethics as an aspect of corporate governance.
It identifies the 26.8 percent of the 500 largest U.S. public corporations that, in their annual report to shareholders, commit to ethical behavior toward their stakeholders or emphasize compliance with their code of conduct.
The financial performance of these corporations ranks higher than that of those who do not at a significance level of p = < 0.005, using the 1997 Business Week ranking which averages eight publicly-reported measures of historical financial performance.
These findings should motivate more corporations to utilize the principles of Social and Ethical Accounting, Auditing and Reporting (SEAAR).

The current study.
This is the first large-scale study to measure the linkage between a large public corporation’s overall financial performance and its stated commitment to recognize its stakeholders’ interests.

The objective of the current analysis is to use this information to answer the question whether a mainstream emphasis on corporate social and ethical account- ability is consistent with superior financial performance.

The study’s significantly affirmative findings should encourage more corporations to increase their emphasis on stakeholder accountability, a key element of SEAAR.

Expressing the primacy of shareholder interests to the