Corporate Social Responsibility and Managerial Entrenchment
Journal of Economics and Management Strategy, 16 (3): 741-771
41 Pages Posted: 25 Jun 2007 Last revised: 28 Nov 2014
Date Written: April 1, 2007
When stakeholder protection is left to the voluntary initiative of managers, relations with social activists may become an effective entrenchment strategy for inefficient CEOs. We thus argue that managerial turnover and firm value are increased when explicit stakeholder protection is introduced so as to deprive incumbent CEOs of activists' support. This finding provides a rationale for the emergence of specialized institutions (social auditors and ethic indexes) that help firms commit to stakeholder protection even in case of managerial replacement. Our theory also explains a recent trend whereby social activist organizations and institutional shareholders are showing a growing support for each others' agenda.
Keywords: Corporate Governance, Corporate Social Responsibility, Managerial Entrenchment,
JEL Classification: G34, G38
Suggested Citation: Suggested Citation