Dual Class Shares and Corporate Social Responsibility

• In Event: Public Interest & Social Responsibility

Abstract

The jury is out on whether dual class share structures are overall beneficial or detrimental to society and to firm performance. Prior research suggests that managers of firms with dual class shares structure may be insulated from pressure from shareholders and other stakeholders (Tinaiker 2014; Nguyen and Xu 2010), and some argue that this allows managers to pursue longer term goals, while others argue that it facilitates managers pursing their immediate short term self-interest. CSR activities have been found to have longer term financial benefits at the expense of short term profitability. Thus to explore the time horizon associated with activities of dual class share structure firms, we consider the association between dual class shares structure and firms’ corporate social responsibility for 921 U. S. firms in 2014. We find that firms with dual class share structures have lower CSR performance, and that this relationship is particularly strong for the social aspects of CSR performance. Our result contributes to the CSR literature by showing that dual class share structure firms tend to be less socially responsive than single class share structure firms. Furthermore, our findings support previous research that shows that managers of dual class share structure firms may be better able to resist pressure from non-dominant shareholder and other outside parties than singe class share structure firms, but in so doing, they pursue goals that meets short term objectives.

Authors

• Lois Schafer Mahoney, Eastern Michigan University

• Charles P Cullinan, Bryant University

• Linda Thorne, York University