Who Benefits from Corporate Social Responsibility?

Firms often donate a share of profits to charity as a form of Corporate Social Responsibility (CSR) to attract and retain talent. Previous studies suggest that such initiatives can motivate workers to work harder in lieu of higher wages, generating benefits for both sides of the labor market. We design a novel version of a commonly used experiment to control for self-selection and find that wages remain the most effective incentives to attract and motivate workers, with corporate donations playing a smaller role than previously suggested. We also show that when firms donate a share of profits to charity, they reduce wages to keep their profits constant, negatively affecting workers’ earnings. Our results reveal that CSR initiatives can be at best marginally beneficial for firms, but considerably costly for workers.