Strategic Leadership in Corporate Social Responsibility

We propose a strategic theory of Corporate Social Responsibility (CSR). Shareholder maximizers commit to a mission statement that extends beyond firm value maximization. This commitment leads firms to change their actions in ways that ultimately favor shareholders. We thus provide a formal analysis of the “doing well by doing good” adage in an industry setting where firms act strategically. We also provide conditions such that the industry game we study has the nature of a pure coordination game. Our framework thus provides a natural and novel theory of strategic leadership in a CSR. By selecting a CSR mission statement, a first mover leads the industry to a Pareto optimal equilibrium.