Corporate Social Responsibility in a Corporate Governance Framework
Yohanes E. Riyanto
Nanyang Technological University (NTU) - Division of Economics
Linda A. Toolsema
University of Groningen
May 10, 2007
We argue that Corporate Social Responsibility (CSR) may affect the agency relationship inside a firm. We analyze how CSR and the threat of stakeholder activism influence effort of manager and shareholder, and describe how CSR may arise endogenously in this context. By engaging in CSR the shareholder can commit to less monitoring, increase the manager's effort, and raise profits. Even a socially indifferent shareholder may thus benefit from CSR and prefer to behave socially responsibly. He may even find it optimal to sponsor a social activist, giving it the means to exert pressure.
Number of Pages in PDF File: 33
Keywords: Corporate Social Responsibility, Corporate Governance, Stakeholder Activism
JEL Classification: G30, M14
Date posted: May 23, 2007
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