The Impact of Shareholder Social Activism on Firms’ Corporate Social Performance Through SRI Fund Investment

Abstract

The aim of this chapter is to analyse comparatively the effectiveness of different tactics of social activism that conscientious investors (as SRI funds) can apply on the firms they invest in order to increase firms’ corporate social performance (CSP). Even though some papers on shareholder social activism have been published in the last years, these studies have not analysed its effectiveness on firms’ CSP, so that this effect remains unclear and there is even some disagreement as to whether it can be an effective tool for changing corporate social behaviour. To conduct this research, a sample of 299 international firms drawn from a database of 238 equity SRI funds operating in Europe in the period 2006–2007 was used to estimate hierarchically a multivariate model. Our findings support the stakeholder salience theory, where power is an important driver of salience, being shareholders’ relative economic power an important moderating factor in the relationship between shareholder social activism and firms’ CSP. This conclusion does not seem to support the postulates favouring the voluntary application of CSR by firms so that it raises questions about the social and environmental accountability of those firms in which SRI funds are investing in.