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The Assignment of a CSR Level of Action: Rule vs Discretion

Florence Touya

Working Papers from CATT - UPPA - Université de Pau et des Pays de l'Adour

Abstract: Socially responsible behaviors represent a growing concern for consumers, employees, investors. Beyond their economic impact, companies are made accountable and responsible for the social, the environmental incidence of their activities. Their governance, their processes, the security of their products and the working conditions they offer are more and more carefully examined (as, for instance, the increasing importance of the duty of vigilance for multinational enterprises). Public policies, especially through regulation, seek to avoid - or at least limit some of the negative impacts that can be related to firms' activity and choices. Yet, many drawbacks may prevent regulation from succeeding : lack of information or of expertise, capture by interest groups... In some cases, companies can even turn more efficient in making the decisions that better suit stakeholders' expectations, essentially as they may have better information about their preferences, which is an essential piece. As a by-product it is worth examining whether some decisions must be taken by regulators or should rather be delegated to firms. Through a mechanism without transfer approach in a setting involving information asymmetries, we study under which conditions the decision is best assigned to the regulator. We show that for relatively low values of the private parameter, a binding rule will be preferred, and it is even stronger when asymmetry of information is introduced w.r.t. the knowledge the firm will get from the representative stakeholder. The divergence between the decision-maker and the firm strengthens and less communication takes place, which corresponds to a lower degree of delegation granted to companies. Thus, the optimal scheme is made of a combination of a rigid policy and a more flexible one over signicant values of the private parameter.

Keywords: Corporate Social Responsibility; Mechanism without transfer; Informational asymmetry; Delegation; Risk; Expertise (search for similar items in EconPapers)
JEL-codes: D82 H20 H71 H77 Q54 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-reg
Date: 2019-01, Revised 2019-06
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