In this paper I investigate the impact of Corporate Social Irresponsibility (CSI) in shareholder activism. Specifically, I posit that companies with higher levels of CSI will be more targeted by activist shareholders. However, linguistic obfuscation in sustainability reports will weaken this relationship. Using data from the S&P 500 firms, I find that as the severity of the CSI events increases, measured by the dollar amount of fines, so do the number of ESG-related shareholder proposals. Notwithstanding, this relationship is attenuated by the level of obfuscation in sustainability reports. The opposite happens for firms that have small but frequent violations, suggesting that shareholders react differently to firms that misbehave “badly” vs. firms that misbehave often (when those violations are small). This paper contributes to the literature on shareholder activism, information disclosure and corporate social irresponsibility.
