Company Delistings from the UN Global Compact: Limited Business Demand or Domestic Governance Failure?

Jette Steen Knudsen

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    Abstract

    While a substantial amount of the literature describes corporate benefits of corporate social responsibility (CSR) initiatives, the literature is silent concerning why some companies announce CSR initiatives, yet fail to implement them. The article examines company delistings from the UN Global Compact. Delistings are surprising because the CSR agenda is seen as having won the battle of ideas. The analysis proceeds in two parts. I first analyze firm-level characteristics focusing on geography while controlling for sector and size; I find that geography is a significant factor while small firms are more likely to be delisted than large firms and some sector characteristics determine delistings. Next, I proceed to uncover country-level characteristics including the degree of international economic interdependence as well as the quality of governance institutions. Multivariate regression analysis shows that companies are less likely to be delisted from countries where domestic governance institutions are well-functioning. To a lesser extent, I find that firms from countries with international economies are more willing to comply with the UN Global Compact requirements. Countries with a high share of outward FDI/capita have a lower share of delisted firms as do countries that are internationally competitive.
    Original languageEnglish
    JournalJournal of Business Ethics
    Volume103
    Issue number3
    Pages (from-to)331-349
    ISSN0167-4544
    DOIs
    Publication statusPublished - 2011

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