Does past Corporate Social Performance Matter in a Crisis? Layoffs during the COVID-19 Pandemic

In this paper, I examine the effects of a firm’s prior reputation in enforcing good CSR practices on its involuntary turnover behavior during the first year of the COVID ’19 pandemic. Specifically, using difference-in-difference analysis on 3,011 publicly traded US firms over the period 2013-2020, I compare announced layoffs across firms with a history of above and below par corporate social performance. Additionally, I investigate the role of the Social and Governance pillars separately on layoffs during 2020. CSR comprises several metrics of employee treatment and well-being, and is expected to shield workers from mass layoffs during the pandemic. Meanwhile, the resource-based perspective suggests that high-CSR firms could leverage their superior managerial agility and organizational capabilities to mitigate the negative consequences of layoffs. Consistent with the latter theory, the findings of this paper suggest that past corporate social performance may be a poor indicator of job security during the recent unemployment crisis. Announced layoffs were significantly higher across high-CSR firms, implying that employees factored in below other stakeholders in the hierarchy of these firms.