You received the FSI-PRI Scholarship for the best research in responsible investment for 2016. Tell us about your interest in responsible investment.
I previously did my master’s degree in Pure Finance in Tunisia. As part of my research, I studied the financial expertise of boards of directors within Tunisian public companies. At this time, the Jasmine Revolution in Tunisia was opening the door for opportunities for social change and prosperity. My interest in the financial competence of boards and corporate governance mechanisms in general was heightened by my conviction that organizations must possess the appropriate financial expertise to be able to handle their economic and financial responsibility to society and also to provide a vehicle for economic development. Due to a lack of data accessibility, I unfortunately gave up this aspect of my research.
Following my decision to immigrate to Canada, my interest in both the economic aspects and the social and environmental responsibility of businesses has grown. Through this interest, I developed a thesis collaboration at UQAM, with Professor Bouchra M’Zali in Department of Strategy, Social and Environmental Responsibility. Interestingly, my review of CSR literature revealed that most studies had excluded a number of companies operating in controversial industries. I questioned the reasons for this exclusion and whether it meant that engaging in CSR strategies by more conventional sectors is more profitable than engaging in CSR by controversial sectors. That’s how I started my adventure with responsible investment – by asking the question: If “good companies” are able to increase their financial performance by engaging in strategic CSR activities (“Doing well by doing good”), and if “bad companies” are able to increase their financial performance by improving their image (“Doing well by looking good”), then what about the “worst” companies which core business activities are likely to cause negative social, moral, ethical and environmental impacts? Are they engaging in CSR strategies? And if so, do they benefit financially from their CSR engagement?
What made you decide to enter the FSI-PRI Scholarship competition and to pursue your area of research?
Academically, I was in an unusual situation. I was affiliated with the Université des Antilles in Martinique (UA), in collaboration with UQAM. There were not so many scholarships available in UA. Previously, in Tunisia, I had managed to receive a research grant for a period of six months—but it was not enough to cover three years of thesis work. So, I turned to Quebec. The admission requirements for the FSI-PRI Scholarship were not overly restrictive. One of the requirements was to be affiliated with a university here in Quebec. Since I fulfilled the admissibility conditions, I decided to apply. When I found out that I won, I was so happy!
Your work was compensated because it has contributed to the advancement of research and knowledge of environmental, social and governance (ESG) subject areas for financial sector practitioners. What are the salient facts of your results?
One of the most striking facts of my research is that, despite the exclusion of firms in controversial sectors from the CSR literature, companies operating in these sectors are clearly aware of the benefits of engaging in CSR strategies in order to comply with new social and ethical standards and also to reduce their financial and reputational risk.
Although these companies produce goods and services with adverse effects on individuals and society, these products clearly hold a certain value, particularly since the provision of these products and services by companies in a market economy tends to result in fewer bad consequences — compared to a situation in which these products are prohibited or not regulated but accessible via the black market.
Thus, I proposed that CSR must play a different role for companies in these controversial sectors. I adopted Drucker’s (1974) visionary view of CSR, which proposed that social responsibility demands that companies should go beyond the limits of their core business activities to assume the responsibility for their social impacts. This visionary and promising role of CSR is suited to controversial industries. “CSR as usual” is unlikely to provide a solution for controversial companies since they are unable to change their products. Therefore, while remaining aware of the social impacts imposed by the companies in these sectors, I showed that these companies used CSR to take responsibility for their negative social impacts, to reduce their level of financial risk and to protect themselves from a value depreciation during times of crises.
Many business ethicists consider that the violation of social and moral values is a determining factor in a company’s CSR image. They also consider that since the negative impacts of companies in controversial industries can never be corrected, these companies cannot be viewed as socially responsible actors. However, my results demonstrated that these companies behave like businesses in more conventional industries and tend to act strategically to mitigate their negative social impacts.
However, companies operating in controversial sectors show a lack of interest in governance activities, demonstrating that they are not willing to engage to adopt good governance practices and be more transparent about their actions and impacts. Thus, one potential area for future research is to find explanations for the behaviour of controversial companies in their corporate governance mechanisms and practices.