Corporate Social Responsibility and Managerial Entrenchment

Corporate Social Responsibility and Managerial Entrenchment

Giovanni Cespa, Giacinta Cestone

Series number :

Serial Number: 

Date posted :

April 01 2007

Last revised :

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  • Corporate governance • 
  • Corporate Social Responsibility • 
  • Managerial Entrenchment • 
  • Social Activism • 
  • Stakeholders

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.

Published in

Published in: 
Journal of Economics and Management Strategy, 16 (3): 741-771 | CEPR Discussion Paper No. 4648 | Journal of Economics & Management Strategy, Vol. 16, No. 3, pp. 741-771, Fall 2007


Real name:
Giovanni Cespa