A new study by professors at Brigham Young University shows family-owned businesses are more socially responsible. They treat employees better, contribute to the community more and damage the environment less, all because of one thing -- the family name is on the line.
"The theory behind it is that the family has its name on the building, so if the business does something that is not seen as socially responsible it reflects badly on the family," business professor and study co-author Gibb Dyer said. "With other big corporations there is not that personal connection. Those managers and CEOs don't have the responsibility to uphold the family name."
The study was conducted using data collected yearly on the top 500 companies in the U.S. The data is collected by a company called KLD, which then sells the data to companies who are investing in the stock market. Companies can earn either a positive or negative score on what are called social initiatives. Companies are scored on how much they impact the environment, product safety, community involvement, employee treatment and diversity.
The study showed that being family owned didn't impact all of the initiatives.
"Community responsibility, employee and product services were all greater when a business is family owned," Dyer said. "That would be, do we try to avoid layoffs? Do we try to provide employee benefits? Do we listen to concerns? In the community, do we support community initiatives and charities? Are we producing products that are safe and effective?"
While the study only included data from larger national corporations, the authors of the study say they think the results would be greater in smaller family-owned businesses.
Jeff Clyde, a fourth-generation member of the Orem-based Clyde companies, agrees with findings of the study.
"I had a great-grandfather who started the business. He was a shrewd businessman but cared about his employees, and that has trickled down," Clyde said. "I think the family name is being carried on and that puts a greater responsibly on us to make sure we carry on those core values that were originally established."
Clyde says a few of the companies' core values include valuing the people that work for the company, providing a quality product at a fair price and giving back to the community.
"As we drive around as a family we always ask my kids 'Who built that?' or 'who did that job?' and they learn real quick the answer is W.W. Clyde and that we can be proud of what we have done," Clyde said.
Another interesting finding of the study was that a company's social responsibility was greater if the founder of the company was still living.
"In some ways with the founder being alive there is a greater sense of accountability for being social responsibility and being aware of the stakeholders, more so than when that founder passes on," said business professor John Bingham, co-author of the study. "The findings suggest the family plays a very big role in the values cascading down through the company and keeping those values intact and alive."
Community involvement was one of the biggest ways family-owned businesses differed from other companies.
"Organizations that are family owned would be more likely to sponsor community enhancement projects, at-risk youth programs and provide incentives for employees to give back to those individuals who are neighbors and friends they live with," Bingham said.
Clyde says they have given back to the community by donating money to Utah Valley University to help further their heavy highway construction program and by sponsoring the Springville City balloon festival.
"We need to give back to the community that we live and work in," Clyde said. "I don't think all businesses have that concern because they aren't our there working with people in the community."
The study was based on data collected from 1991 to 2005 and was published in the Journal of Business Ethics.
Source: http://www.heraldextra.com
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