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Corporate Social Responsibility and Managerial Entrenchment

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Author Info
Giovanni Cespa () (University of Salerno, CSEF and CEPR)
Giacinta Cestone () (University of Salerno, CSEF and CEPR)

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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 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

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy in its series CSEF Working Papers with number 173.

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Date of creation: 01 Jan 2007
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Handle: RePEc:sef:csefwp:173

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Related research
Keywords: Corporate Governance Corporate Social Responsibility Managerial Entrenchment Social Activism Stakeholders

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Find related papers by JEL classification:
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
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  2. Dyck, Alexander & Zingales, Luigi, 2002. "The Corporate Governance Role of the Media," CEPR Discussion Papers 3630, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Timothy J. Feddersen & Thomas W. Gilligan, 2001. "Saints and Markets: Activists and the Supply of Credence Goods," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 10(1), pages 149-171, 03. [Downloadable!] (restricted)
  4. Marco Pagano & Paolo Volpin, 1999. "The Political Economy of Corporate Governance," CSEF Working Papers 29, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy, revised 01 Jul 2005. [Downloadable!]
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  5. Brian E. Becker, 1995. "Union rents as a source of takeover gains among target shareholders," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 49(1), pages 3-19, October.
  6. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
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  7. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-64, April. [Downloadable!] (restricted)
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  8. Enrico C. Perotti & Ernst-Ludwig von Thadden, 2004. "The Political Economy of Dominant Investors," Tinbergen Institute Discussion Papers 04-091/2, Tinbergen Institute. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Diego Prior & Jordi Surroca & Josep A. Tribo, 2006. "Earnings Management And Corporate Social Responsibility," Business Economics Working Papers wb062306, Universidad Carlos III, Departamento de Economía de la Empresa. [Downloadable!]
  2. Pagano, Marco & Volpin, Paolo, 2005. "Shareholder Protection, Stock Market Development and Politics," CEPR Discussion Papers 5378, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Anna Torres & Josep A. Tribó, 2007. "Ownership structure, customer satisfaction and brand equity," Economics Working Papers 1016, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2007. [Downloadable!]
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This page was last updated on 2008-9-2.

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