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Please use this identifier to cite or link to this item: http://hdl.handle.net/1860/219

Title: Corporate governance in socially responsible firms
Authors: Webb, Elizabeth
Keywords: Corporate governance;Boards of directors
Issue Date: 23-Sep-2003
Abstract: This study extends the analysis of agency relations to include all stakeholders by investigating the corporate governance structure of socially responsible (SR) firms. Using a sample of 394 SR firms and comparing these to a matched sample of firms, I find that that the SR firms have characteristics associated with effective board structures. They have a larger proportion of outsiders and women on the board, and are less likely to have a CEO who is also the chairman of the board. Further, these results are robust to changes in sample, signifying that these characteristics are indicative of effective boards. This suggests that SR boards are better able to alleviate agency problems between managers and shareholders than are non-SR boards due to their promotion of firm stakeholders. I also examine the effectiveness of SR boards by investigating evidence of monitoring. I focus on two important and observable board monitoring roles: CEO compensation and CEO replacement. CEO turnover tests indicate that SR firms are more likely to experience CEO turnover following poor performance than are non-SR firms. Analysis of CEO compensation indicates that SR firms exhibit weaker pay-for-performance sensitivity than non-SR firms; however, higher sensitivity is likely not necessary at SR firms. Furthermore, option grants to CEOs of SR firms do not appear to result in future risk taking behavior, whereas such grants are significantly related to future risk at non-SR firms. Overall, results indicate that the boards of directors of SR firms are effective monitors.
URI: http://dspace.library.drexel.edu/handle/1860/219
Appears in Collections:Drexel Theses and Dissertations

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