Managerial Entrenchment and Corporate Social Performance

Abstract

We examine empirically the relationships amongst managerial entrenchment practices, social performance, and financial performance.We hypothesize that entrenched managers may collude with non-shareholder stakeholders in order to reinforce their entrenchment strategy; this is particularly so in firms that have efficient internal control mechanisms. Moreover, we prove that the combination of entrenchment strategies and the implementation of socially responsible actions have particularly negative effects on financial performance. We test these contentions with a sample of 358 companies, from 22 different countries, for the period 2002–2005.