Discussion paper
DP18121 Strategic Leadership in Corporate Social Responsibility
We propose a theory of strategic Corporate Social Responsibility (CSR). Shareholders commit to a mission statement that extends beyond value maximization but ultimately achieve higher shareholder value than if committing to value maximization. We thus provide a new formalization of the “doing well by doing good” adage. We develop conditions such that the mission-statement game is a pure coordination game, which provides a natural and novel theory of strategic leadership in CSR: By selecting a CSR mission statement, a first mover leads the industry to a Pareto superior equilibrium. The theory can rationalize recent evidence on correlated industry-wide CSR adoption.
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