Do labor unions enhance corporate social performance? Evidence from Korean financial markets

Abstract

This study examines the impact of labor unionization on corporate social responsibility (CSR) in South Korean listed companies, particularly in the context of chaebol-affiliated firms. Using a dataset of 2,622 firm-year observations between 2005 and 2009, the study employs regression analyses to explore the relationship between unionization and CSR performance. Key findings indicate a significant negative correlation between labor unionization and CSR engagement, suggesting that unionized firms exhibit less involvement in CSR activities. This association, however, is not significant in chaebol-affiliated firms, where the unique corporate structure and shared resources appear to mitigate the influence of labor unions on CSR. Furthermore, the study reveals a positive link between CSR initiatives and labor productivity in unionized firms, indicating that CSR may enhance employee efficiency. The study highlights the intricate relationships between labor unionization, corporate governance, and CSR, particularly in the context of Korean business conglomerates. It emphasizes the importance of aligning labor interests with CSR commitments and underscores the role of effective corporate governance in promoting CSR activities. The positive impact of CSR on labor productivity underscores its potential in boosting employee performance. © Ilhang Shin, Sorah Park, 2024.