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Trees in the Forest: How Do Family Owners Make CSR Decisions in Business Groups?

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Abstract

Previous studies have been split over how to view family owners’ CSR engagement, arguing that they either engage in or disengage from CSR based on different motives (i.e., preserving socio-emotional wealth vs. seeking rent expropriation). Focusing on family owners in business groups, this study integrates these divergent views. We hypothesize that family owners would pursue both motives simultaneously by optimizing the level of CSR of each affiliated firm depending on their ownership level. Furthermore, we argue that this tendency is moderated by group-level contexts. Using a sample of Korean business groups, we found that family ownership is negatively associated with affiliated firms’ CSR. Also, this negative relationship is more pronounced when firms belong to business groups with more charitable corporate foundations and when business networks are greater in their scope and scale. This study contributes to the literature by offering a more complete understanding of how family owners make CSR decisions in business group contexts.

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Notes

  1. In this study, we used the term “family ownership,” which captures a whole breadth of a family’s influence in terms of ownership (direct and indirect). Families own an affiliated firm’s shares directly and/or they own shares indirectly through inter-firm shareholdings. For example, the Lee family, the founding family of Samsung Group, directly owns about a 30.5% share of Samsung C&T (i.e., direct ownership). Also, other affiliated firms such as Samsung SDI (4.7%), Samsung Fire Insurance (1.4%), and Samsung Electro-mechanics (2.6%) have significant ownership of Samsung C&T (i.e., indirect ownership). Because the Lee family members also have substantial equity ownership of these affiliated firms, they are able to exercise indirect influence on Samsung C&T, as shown in Fig. 5 in Appendix 1. Family ownership is measured by the sum of direct ownership and indirect ownership.

  2. Before 2012, contribution to economic development (e.g., business performance, R&D investment, dividend payout ratio, labor productivity increase, and tax payments) was one of the seven evaluation components. Since 2012, the Korea Economic Justice Institute (KEJI) revised its evaluation method by excluding the contribution to economic development.

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Authors and Affiliations

  1. Management, Entrepreneurship, & Technology, Lee Business School, University of Nevada, Las Vegas, 4505 S. Maryland Pkwy, Las Vegas, NV, 89154, USA

    Won-Yong Oh

  2. Sogang Business School, Sogang University, Matthew (MA) 503, 35 Baekbeom-ro, Mapo-gu, Seoul, 04107, Korea

    Hojae Ree & Young Kyun Chang

  3. Faculty of Management, University of Warsaw, Szturmowa 1/3, 02-678, Warsaw, Poland

    Igor Postuła

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Appendix

Appendix

See Tables 3, 4, and Fig. 5.

Table 3 Summary of in-depth literature review on the effects of family ownership, control, and involvement on CSR
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Table 4 Dependent variable: sub-dimensions of KEJI Index and assigned score
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Fig. 5
figure 5

Source: The Korea Fair Trade Commission (KFTC), 2015

Family-based business group and ownership structure: The case of Samsung Group (simplified version).

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Oh, WY., Ree, H., Chang, Y.K. et al. Trees in the Forest: How Do Family Owners Make CSR Decisions in Business Groups?. J Bus Ethics 187, 759–780 (2023). https://doi.org/10.1007/s10551-022-05270-3

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