Assessing the Concurrent Validity of the Revised Kinder, Lydenberg, and Domini Corporate Social Performance Indicators

Abstract

This article examines the concurrent validity of the Kinder, Lydenberg, Domini Research & Analytics (KLD) corporate social performance (CSP) measures. Because KLD changed its evaluation methods to richer approaches, a new look at the concurrent validity of the indicators is necessary. To do this new look, the authors examine the new "Binary" and "Continuous" versions of the KLD and compare them with previous versions of KLD. The results suggest that the continuous scores provide better measurement characteristics than do the binary version. Overall, the new versions of the KLD data demonstrate concurrent validity with the original version.

Proactive versus Reactive Corporate Environmental Practices and Environmental Performance

“…The results from the sub-samples indicate that simply aggregating KLD concern and strength areas is likely to mask the true meaning of the data [13]. The regression results may demonstrate that, although scholars can take advantage of the overall scores the existing measurement methods provide, they are likely to repeat an unnoticed analytic fallacy with the continuing unsound empirical practice of subtracting total concerns from total strengths [50]. Before executing the nested regression models, the study executed a multicollinearity test by using the variance inflation factor (VIF) [58,60].…”

“…The KLD employs independent and trained research staff to annually read, review, and evaluate public corporate documents (e.g., annual reports, company websites, firms' social performance reporting) and other data sources. The KLD became the research standard for environmental sustainability research [22], and it has been commonly used for independent analysis [13,20,50]. The KLD environment indicators encompass seven "strength" and seven "concern" dichotomous variables.…”

“…These methods, however, are likely to mask the underlying meanings of the disaggregated ratings because these methods simply aggregate and subtract statistically unrelated disaggregate KLD rating scores [13,50]. Alternatively, some recent studies have called for fine-grained disaggregate measures, given that the KLD ratings have low internal reliability and external validity, and thus represent different constructs [13,50].…”

Rethinking the Corporate Financial–Social Performance Relationship: Examining the Complex, Multistakeholder Notion of Corporate Social Performance

“…Much of the recent concern over summing the strengths and concerns is based on the recent changes in how the KLD data scoring is reported (Hart and Sharfman in press). Since we are using data prior to the reformulation of the scoring, we elected to utilize the more traditional approach, allowing us to better compare our data results with prior work in this field.…”

“…Methodological concerns were raised regarding the normality of the data (Hart and Sharfman in press). This potential weakness of non‐normality could result in a skewed, kurtotic, or bimodal distribution of the data and lead to unreliable results from the data analysis.…”