Corporate Social Responsibility in a Corporate Governance Framework

33 Pages Posted: 23 May 2007  

Yohanes E. Riyanto

Nanyang Technological University (NTU) - Division of Economics

Linda A. Toolsema

University of Groningen

Date Written: May 10, 2007

Abstract

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

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

Yohanes E. Riyanto (Contact Author)

Nanyang Technological University (NTU) - Division of Economics ( email )

HSS 04-53, 14 Nanyang Drive
Singapore, 639798
Singapore

Linda A. Toolsema

University of Groningen ( email )

P.O. Box 800
9700 AV Groningen
Netherlands

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