Disclosure Law and the Market for Corporate Social Responsibility

Abstract

We analyse the expansion of corporate social responsibility (CSR) accountability fostered by the United Kingdom's legal disclosure strategy which is based on a three-way interplay of law, voluntary CSR and the financial market. We review developments in the law, analyse the politics and economic models behind them, and assess the practical impact of CSR. To reconcile CSR with established assumptions about the purposes of companies and company law, it is necessary to justify the pursuit of CSR objectives as ultimately being in the company's economic interests. To this end we consider how CSR affects shareholder value by examining the stock market performance of companies included in the FTSE4Good ethical indices. By comparing the companies included in these indices with excluded companies and the market as a whole, we obtain empirical evidence concerning investor perceptions of the value-creating potential of CSR activities.