The Nail that Sticks Out: Corporate Social Responsibility and Shareholder Proposals

Abstract

We investigate whether shareholders consider CSR performance when submitting proxy proposals. We find that shareholders are more likely to propose governance changes when a firm has more CSR strengths and more CSR concerns. The results hold across popular proposal types, different sponsors, and different categories of CSR. We find similar results for social proposals. Although CSR strengths and concerns are not associated with the percentage of votes received in favor of a proposal, the higher likelihood of receiving shareholder proposals translates into a higher likelihood that at least one shareholder proposal receives majority support at the meeting. Our results suggest managers may avoid distinctively strong (and weak) CSR performance to reduce the costs of standing out.

Keywords: ESG, corporate social responsibility, shareholder activism, corporate governance