In the modern commercial era, companies and their managers are subjected to well publi- cised pressure to play an increasingly active role in society – so called “Corporate social responsibility”. It has been argued that an element in this development is simply enlight- ened self-interest in that social responsibility enhances corporate image and financial per- formance. To date the evidence to support this thesis derives from North America. Out- side this continent evidence for any relation- ship is sparse. T his study investigates the claims that social responsibility and economic performance are linked and attempts to test the relationship within a UK context. This study will initially attempt to define the concept of corporate social responsibility and to examine its guiding principles. Subse- quently, the available empirical research into the link between corporate social responsibili- ty and economic performance will be evaluat- ed and research hypotheses will be formulat- ed. Finally, the research method, measures used, findings and conclusions will be pre- sented. Definitions Corporate social responsibility (CSR) has recently been the subject of increased acade- mic attention. While social responsibility has figured in commercial life over the centuries, in the modern era increasing pressure has been placed on corporations to play a more explicit role in the welfare of society. Although the topic rose to prominence in the 1970s (Carroll, 1979; Wartick and Cochran, 1985), the first publication specifically on the field dates back to 1953, with Bowen’s “Social responsibilities of the businessman”. In this work Bowen argues that industry has an obligation “to pursue those policies, to make those decisions, or to follow those lines of actions which are desirable in terms of the objectives and values of society” (Bowen, 1953, p. 6). Epstein (1987), however, argues that the concept of specific business ethics can be traced further back to certain academics and businessmen in the nineteenth century who promulgated the belief that “private business is a public trust”. Bowen (1953) sets the scene in this field by suggesting that the concept of specifically corporate social responsibility emphasises that: • businesses exist at the pleasure of society and that their behaviour and methods of 25 European Business Review Volume 98 · Number 1 · 1998 · pp. 25–44 © MCB University Press · ISSN 0955-534X Corporate social responsibility and economic performance in the top British companies: are they linked? George Balabanis Hugh C. Phillips and Jonathan Lyall The authors George Balabanis is a Lecturer at the European Business Management School, University of Wales Swansea, Swansea, UK. Hugh C. Phillips and Jonathan Lyall are at the Leicester Business School, DeMontfort University, Leicester, UK. Abstract This paper investigates the relationship between corporate social responsibility (CSR) and the economic performance of corporations. It first examines the theories that suggest a relationship between the two. To test these theories, measures of CSR performance and disclosure developed by the New Consumer Group were analysed against the (past, concurrent and subsequent to CSR performance period) economic performance of 56 large UK companies. Economic performance included: financial (return on capital employed, return on equity and gross profit to sales ratios); and capital market performance (systematic risk and excess market valuation). The results supported the conclusion that (past, concurrent and subsequent) eco- nomic performance is related to both CSR performance and disclosure. However, the relationships were weak and lacked an overall consistency. For example, past economic performance was found to partly explain variations in firms’ involvement in philanthropic activities. CSR disclo- sure was affected (positively) by both a firm’s CSR perfor- mance and its concurrent financial performance. Involve- ment in environmental protection activities was found to be negatively correlated with subsequent financial performance. Whereas, a firm’s policies regarding women’s positions seem to be more rewarding in terms of positive capital market responses (performance) in the subsequent period. Donations to the Conservative Party were found not to be related to companies’ (past, concur- rent or subsequent) financial and/or capital performance.