Reviews the development of the corporate social responsibility (CSR) concept and its four components: economic, legal, ethical and altruistic duties. Discusses different perspectives on the proper role of business in society, from profit making to community service provider. Suggests that much of the confusion and controversy over CSR stem from a failure to distinguish among ethical, altruistic and strategic forms of CSR. On the basis of a thorough examination of the arguments for and against altruistic CSR, concurs with Milton Friedman that altruistic CSR is not a legitimate role of business. Proposes that ethical CSR, grounded in the concept of ethical duties and responsibilities, is mandatory. Concludes that strategic CSR is good for business and society. Advises that marketing take a lead role in strategic CSR activities. Notes difficulties in CSR practice and offers suggestions for marketers in planning for strategic CSR and for academic researchers in further clarifying the boundaries of strategic CSR.

The boundaries of strategic corporate social responsibility

This paper examines the effect of CEO compensation contracts on misreporting We find that the sensitivity of the CEO's option portfolio to stock price is significantly positively related to the propensity to misreport We do not find that the sensitivity of other components of CEO compensation, ie, equity, restricted stock, long-term incentive payouts and salary and bonus have any significant impact on the propensity to misreport Relative to other components of compensation, stock options are associated with stronger incentives to misreport because convexity in CEO wealth introduced by stock options limits the downside risk on detection of the misreporting

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID555903_code89945.pdf?abstractid=555903&mirid=1

The Impact of Performance-based Compensation on Misreporting

We survey institutional investors to better understand their role in the corporate governance of firms. Consistent with a number of theories, we document widespread behind-the-scenes intervention as well as governance-motivated exit. These governance mechanisms are viewed as complementary devices, with intervention typically occurring prior to a potential exit. We further find that long-term investors and investors that are less concerned about stock liquidity intervene more intensively. Finally, we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions.

/pdf/behind-the-scenes-the-corporate-governance-preferences-of-5ijmvrsg04.pdf

Behind the scenes: the corporate governance preferences of institutional investors

http://kedia.rutgers.edu/wp/jfe_published.pdf

The impact of performance-based compensation on misreporting

Corporations sponsoring causes may hope to create the appearance of "good citizenship." Using attribution theory, the authors develop and test a cognitive explanation of sponsorship effects. Results of the experiment suggest that a good fit between a company and the cause it sponsors generates consumer attributions of altruistic sponsor motives and enhances sponsor credibility and attitude toward the sponsor. Mediation analysis results indicate that congruence effects on sponsor attitudes were mediated by sponsor credibility.

CONGRUENCE EFFECTS IN SPONSORSHIP: The Mediating Role of Sponsor Credibility and Consumer Attributions of Sponsor Motive

https://media.terry.uga.edu/socrates/publications/2011/07/pay_performance_1.pdf

Linking pay to performance—compensation proposals in the S&P 500☆

The difficulties of evaluating sports sponsorship are well known. In this study Miyazaki and Morgan use ‘event study analysis’ to assess corporate sponsorship of the 1996 Olympic Games. The theory, well known in financial circles, is that consequences of an activity are reflected in the market price of the sponsor9s stock. The authors examine the changes in company market value (share price) following the announcement of Olympic Sponsorship, and conclude that this type of activity was of positive value to participating companies.

Assessing the Market Value of Sponsoring: Corporate Olympic Sponsorships

We address whether mutual funds act effectively through the proxy voting process by supporting wealth increasing items. We examine 212,620 voting decisions made by 1,794 mutual funds from 94 fund families for 1,047 shareholder proposals voted on between July 2003 and June 2005. We find that mutual funds vote more affirmatively for wealth increasing proposals and that funds’ voting approval rates for these beneficial resolutions are significantly higher than those of other investors. Additionally, fund families do not appear to vote uniformly for proposal types and funds may not always vote consistently within fund families with the characteristics of the fund influencing its role as monitor. Funds also support proposals targeting firms with weak governance. Finally, fund voting approval rates significantly impact whether a proposal passes and whether one is implemented. Our findings provide support for mutual funds being effective monitors.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1431072_code16496.pdf?abstractid=1431072&mirid=1&type=2

Mutual Funds as Monitors: Evidence from Mutual Fund Voting

http://media.terry.uga.edu/socrates/publications/2011/07/evolutionshareholdervoting_JCF12_1.pdf

The evolution of shareholder voting for executive compensation schemes

Using a sample selection and benchmarking methodology designed to more accurately assess merger-related changes in corporate focus, we find a significantly positive relationship between corporate focus and long-term merger performance. Focus-decreasing (FD) mergers result in significantly negative long-term performance with an average 18% loss in stockholder wealth, 9% loss in firm value, and significant declines in operating cash flows three years after merger. Mergers that either preserve or increase focus (FPI) result in marginal improvements in long-term performance. These results are consistent with many corporate focus studies, suggesting that merger studies finding opposite results are the result of measurement error. A positive relationship between changes in focus and long-term performance continues to hold after controlling for other variables. A continuous measure of focus change indicates that the extent of focus changes is significant. Every 10% reduction in focus results in a 9% loss in stockholder wealth, a 4% discount in firm value, and a more than 1% decline in operating performance. Cash-financed FPI mergers exhibit the best, and stock-financed FD mergers the worst, long-term performance. Tests of subsample time periods show that the focus change measure is significant in both time periods, indicating that the extent of corporate focus changes is the more important measure of corporate focus or diversification.

Angela Morgan

Papers

Linking pay to performance—compensation proposals in the S&P 500☆

Assessing the Market Value of Sponsoring: Corporate Olympic Sponsorships

Mutual Funds as Monitors: Evidence from Mutual Fund Voting

The evolution of shareholder voting for executive compensation schemes

The determinants of positive long-term performance in strategic mergers: Corporate focus and cash