Entrenchment v. long- term benefits: Classified boards and CSR
corporate social responsibility; board size; classified boards
Journal Global Responsibility
Althought most corporate directors face reelection by shareholders each year, directors of companies with classified boards are elected for miltiple-year terms. Classified boards may engender managerial entrenchment, which may make directors less responsive to shareholders' interest in corporate social responsibility (CSR). This study aims to assess whether larger boards, with potentially more diverse voices, may be positively related to CSR, and a larger board may change the classified boards/CSR relationships.
The authors examine the relationship between board type (companies with and without classified boards), boards size and CSR for 4,489 firm-years (1,540 with classified boards and 2,949 without classified boards) from 2013 through 2015.
The authors find no difference in CSR strengths between companies with and without classified boards, but the authors do find that companies with classified boards have more CSR concerns than companies without classified boards. For all types of boards, a larger board size is associated with more CSR strengths and reduces the negative impact of having and classified board on CSR concerns.
Classified boards may be less responsive to shareholders' preference for reduced company CSR concer,s but and increase in board size can mititgate this effect.
Classified boards may weaken a company's CSR performance.
This is the first paper to consider the relationship between classified board and CSR.