33 Pages Posted: 23 May 2007
Date Written: 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.
Keywords: Corporate Social Responsibility, Corporate Governance, Stakeholder Activism
JEL Classification: G30, M14
Suggested Citation: Suggested Citation
Riyanto, Yohanes E. and Toolsema, Linda A., Corporate Social Responsibility in a Corporate Governance Framework (May 10, 2007). Available at SSRN: https://ssrn.com/abstract=987962 or http://dx.doi.org/10.2139/ssrn.987962