Corporate Social Responsibility and Managerial Entrenchment

30 Pages Posted: 29 Nov 2004

See all articles by Giovanni Cespa

Giovanni Cespa

Bayes Business School; Bayes Business School; Centre for Economic Policy Research (CEPR)

Giacinta Cestone

Bayes Business School, City University London; ECGI

Multiple version iconThere are 2 versions of this paper

Date Written: September 2004

Abstract

When stakeholder protection is left to the voluntary initiative of managers, relations with social activists may become an effective entrenchment strategy for inefficient CEOs. We, thus, argue that managerial turnover and firm value are increased by the institutionalization of stakeholder protection depriving incumbent CEOs of activists' support. This finding provides a rationale for the emergence of specialized institutions (social auditors and ethic indexes) that help firms commit to stakeholder protection even in case of managerial replacement. Our theory also explains a recent trend whereby social activist organizations and institutional shareholders are showing a growing support for each others' agenda.

Keywords: Corporate governance, corporate social responsibility, managerial entrenchment, social activism, stakeholders

JEL Classification: G34, G38

Suggested Citation

Cespa, Giovanni and Cespa, Giovanni and Cestone, Giacinta, Corporate Social Responsibility and Managerial Entrenchment (September 2004). Available at SSRN: https://ssrn.com/abstract=626851

Giovanni Cespa

Bayes Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44(0)2040708704 (Phone)

Bayes Business School ( email )

United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Giacinta Cestone (Contact Author)

Bayes Business School, City University London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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