Conflicting interests between shareholders and management make companies violate regulations although focusing on CSR activities

Firm’s regulatory violations as well as excessive stakeholder friendliness tend to have a common root: weak alignment of interests between shareholders and managers.

Who poses a bigger threat to stakeholders: strong owners or entrenched managers? Do stakeholder friendly and hostile corporate activities serve the interests of firm’s owners? In his doctoral thesis from the Stockholm School of Economics, Reimo Juks studies how the conflict of interests between shareholders and management is related to firm’s CSR activities and various regulatory violations.

- We live in a world where more and more firms claim to be socially responsible. According to annual reports, big companies have never been better citizens: they pledge to follow best practice in areas ranging from the diversity of their workforce to human rights and the environment. However, if all these firms are truly socially responsible, why is there still so much corporate misbehaviour towards various stakeholders? asks Reimo Juks, PhD from the Stockholm School of Economics.

The study shows that some of the CSR firms are in fact frequent violators of various stakeholder regulations. And it is not the shareholders’ excessive pressure on managers, but rather the lack of it which causes it.

- Firms with strong owners are not necessarily the frontrunners of CSR activities, but they do honor the existing regulations. Ironically, it is the firms with weak owners and regulatory compliance problems that tend to highlight their social responsibility, says Reimo Juks.

These and other findings in the study lead to the conclusion that entrenched managers rather than strong owners represent a legitimate threat to other non-monetary stakeholders.

- Shareholder value maximization tends to strike a fine balance between the interests of owners and other non-monetary stakeholders, says Reimo Juks.

For further information, please contact:
Reimo Juks, PhD, Stockholm School of Economics
Telephone +46-7-37234429
Email: reimo.juks@hhs.se 

Carina Aspenberg, Director of Communications, Stockholm School of Economics
Telephone +46 (0)70 396 90 14
Email: carina.aspenberg@hhs.se 

The Stockholm School of Economics (SSE) is the preeminent business school in Northern Europe.  For more than 100 years, SSE has educated talented men and women for leading positions within business and the public sector. SSE offers bachelor’s and master’s degree programs along with a highly regarded Executive Education and MBA at its primary campus in Stockholm, Sweden as well as its daughter schools in Latvia and Russia. The School is fully accredited by EQUIS (European Quality Improvement System) certifying that all of its main activities – teaching as well as research – are of the highest international standard. SSE is also the Swedish member institution of CEMS (The Community of European Management Schools). Only one business school in any given country is admitted to CEMS, through which Europe's seventeen leading business schools and approximately sixty multinational corporations collaborate.