Corporate Social Responsibility and Reference Shareholders: An Analysis of European Multinational Firms

This paper is the analysis of the corporate social responsibility (CSR) activities of European multinational firms, focusing on the ability of large shareholders to delineate CSR policy. It bases on this analysis on the Dow Jones Sustainability STOXX Index as a measure of a firm's concern for labor conditions, environmental issues, and other aspects of sustainability. Using data from 1,248 firms from five major European Union countries (United Kingdom, Germany, France, Italy, and Spain) for 2000-2004, it finds that institutional investors and other reference shareholders, relative to their ability to contest the largest shareholder, act as a pressure mechanism to improve the firm's commitment to socially responsible actions. In addition, it provides evidence that firms with a multinational dimension show increased concern for CSR.