IV.1- Relationship between social and financial
performance
IV.1.1- A tentative typology of the firms'
performances
The examination of the outcomes of the research on enterprises in
terms of financial
performance (FP) and social performance (SP) enables to assess
various assumptions by considering two dimensions, which designs a tentative
typology: The sign of relationship and causality between these two performances
(O' Bannon and Preston, 1997).
Table5- A set of various assumptions on likely
relationships between SP and FP
|
Causality (univocal
interactive)
|
or
|
Positive link
|
Negative link
|
|
SP influences FP
|
|
A1: «good management»
|
A2: «arbitration»
|
|
FP influences SP
|
|
A3: «available funds»
|
A4: «greed»
|
|
SP and FP interact
|
|
A5: «positive synergy»
|
A6: «non synergy»
|
|
SP and FP do not interact
|
|
A7: «no relationship (between SP and
FP)»
|
|
A8: «complex links (between SP and
FP)»
|
The various assumptions on the likely relationships between SP
and FP can indicate a positive, negative or neutral link. If the existence of
such relationship is proven, it should be known if SP influences FP, or
conversely. One can also wonder whether these phenomena interact. Provided that
attention paid to SP improves relationships between the company stakeholders,
assumption 1 relates to the fact that good management practices are strongly
correlated with good SP and have consequences on FP: An additional cost in well
managed SP is then the landmark of good management and leads thereafter to an
improvement of FP.
In the contrary, assumption 2 describes the case whereby any
socially responsible initiative moves away the leaders from their objective for
profit maximization, i.e. a higher level of SP drives a fall in FP: Thus, it
brings in the concept of trade-off. According to assumption 3,
48
Analysis of microfinances' performance and
development of informal institutions in Cameroon
By Djamaman Brice Gaétan
good FP enables the firm to allocate some margin to social
issues. Thus, an allowance resulting from good economic figures brings in an
improvement of SP.
However, assumption 4 considers the possibility that
financially powerful companies are the worse in terms of SP because of their
leaders? greed, who do not share the margin. Assumptions 5 and 6 design
interactions between SP and FP. According to assumption 5, which gathers
assumptions 1 and 3, better FP results in an improvement in SP and better SP
leads to an improvement in FP: Such a simultaneous and interactive relationship
is a vicious circle whereby financial and social values are created (Waddock
and Graves, 1997).
Conversely, assumption 6 deals with the vicious circle of
disrupting both financial and social values: SP is reduced by a fall in FP,
which in turn degrades SP. This is an example of what may occur when the
leaders wish to instantly change their strategy of wealth distribution in order
to comply with evolving management methods or requirements from financial
markets, as well as economic constraints (D' Arcimoles and Trébucq,
2003).
No relationship, whether positive or negative, will occur
between SP and FP in case of the rejection of assumptions 1 to 6: This neutral
relationship corresponds to assumption 7
(Mc Williams and Siegel, 2001). An additional assumption has
been added i.e. assumption 8 in order to take care of more complex links
between SP and FP, which may result from measurement problems.
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