No Pressure, No Diamonds: The Role of Shareholder Activism on CSR Transparency

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This paper investigates whether pressures from shareholder activism on CSR transparency lead to a change in corporate CSR disclosure. Rather than focusing on whether specific shareholders proposals are implemented, our aim is to understand whether the submission of CSR transparency-related proposals lead firms to increase their level of CSR disclosure. Such change in CSR disclosure is ex-ante not obvious because shareholders proposals typically receive low support, they are often perceived as interference in daily business activities or, irrespective of the voting outcome, are not binding managers to act. Drawing on social movement theory, we conceptualize how shareholders put pressure on firms via use of their voice, challenge corporate activities and bring transformation in corporate practice. We analyze the content of 2,089 CSR-related shareholders proposals filed during the period 2006-2012 and separately identify proposals that specifically request improved CSR transparency from proposals demanding other CSR related initiatives. Using propensity score matching to reduce the bias of confounding variables and choosing our control group from the pool of firms that are targeted by CSR proposals and thus under similar, although not identical, pressure, we show that shareholder activism leads to greater CSR disclosure. Overall, our study contributes to the literature by examining an under explored accounting outcome of activism: CSR transparency.