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Corporate Social Responsability and Managerial Entrenchment

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  • Giovanni Cespa
  • Giacinta Cestone
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    Abstract

    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 by the institutionalization of stakeholder protection depriving 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.

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    File URL: http://research.barcelonagse.eu/tmp/working_papers/139.pdf
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    Bibliographic Info

    Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 139.

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    Date of creation: Aug 2004
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    Handle: RePEc:bge:wpaper:139

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    Related research

    Keywords: Corporate Governance; Corporate Social Responsability; Managerial Entrenchment; Social Activism; Stakeholders;

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    1. Philippe Aghion & Jean Tirole, 1994. "Formal and Real Authority in Organizations," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Stefan Ambec & Philippe Barla, 2001. "A Theoretical Foundation of the Porter Hypothesis," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 54, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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    Cited by:
    1. Eduard Alonso-Paulí, 2007. "Contracting with a quiet life manager," Working Papers, Universidad Pablo de Olavide, Department of Economics 07.19, Universidad Pablo de Olavide, Department of Economics.

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