The Politicization of Social Responsibility

Abstract

Institutional investors are less likely to support shareholder proposals involving environmental and social issues for firms headquartered in Republican-led states. The lower support concentrates in recent years, when politicians became more vocal about firms' social responsibility activities, and among larger institutions and firms, which tend to attract more attention from politicians. Investor support also shifts within states following changes in their leadership. Support for such proposals is 10 percentage points lower in the same state when it is led by Republicans instead of Democrats. The findings suggest that state-level politics and the politicization of an issue impacts institutional investors' votes.

Keywords: institutional investors, partisanship, political polarization, socially responsible investment, CSR

JEL Classification: G23, G30, G34, M14