Corporate Social Responsibility (CSR) and CEO Luck: Are Lucky CEOs Socially Responsible?

Abstract

“Lucky” CEOs are given stock option grants on days when the stock price is the lowest in the month of the grant, implying opportunistic timing, severe agency problems, and poor corporate governance (Bebchuk, Grinstein, Peyer, 2010). We find that lucky (opportunistic) CEOs invest significantly less in CSR. The evidence thus does not support the notion that CSR is primarily used to enhance managers’ private benefits at the expense of shareholders. Rather, lucky CEOs appear to view CSR investments as depriving them of the free cash flow they could otherwise exploit.

Keywords: corporate social responsibility, option backdating, CEO luck, agency theory, agency conflict, CSR

JEL Classification: G30