Does Social Responsibility Always Begin at Home? The Relation Between Firms’ Pension Policies and Corporate Social Responsibility (CSR) Activities
Review of Accounting Studies, Forthcoming
61 Pages Posted: 3 Jul 2021
Date Written: June 21, 2021
Pension freezes are highly visible corporate actions with the potential to hurt the firms’ reputation as a “responsible” employer. We document that firms sponsoring defined-benefit pensions step up CSR engagement following announcements of defined-benefit pension freezes. Freeze firms also increase their usage of CSR-related keywords in public disclosures following the freeze. We find a stronger CSR response to relatively more severe freezes, to more controversial cash-balance conversions, and in larger sponsors. This is consistent with CSR increases being motivated by the need for reputation-repair. We also find that CSR increases following an accounting rule change that makes pension deficits more visible. Collectively, our findings highlight an important driver of CSR: the need to restore or manage reputation, especially in the face of corporate actions that can hurt stakeholders.
Keywords: Pension Freezes, Pension Funding, Corporate Social Responsibility, Corporate Reputation
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