Zinat S. Alam, Chinmoy Ghosh, Harley E. Ryan, Lingling Wang
We show that firms report lower CEO-employee pay ratios when they use complex methods to identify the median employee, whose total pay is the denominator in the ratio. Firms choose complex methods when their headquarter states have stronger prosocial attitudes toward income equality and when CEO compensation is higher. Neither industry nor compensation design differences explain this choice. We find no evidence that firms make pay changes to reduce the pay differential between CEOs and general employees. Together, our results suggest that some firms strategically estimate pay ratios in response to social pressure, which alters the efficacy of compensation disclosure.
{"title":"CEO Pay Ratio Estimation under Social Pressure","authors":"Zinat S. Alam, Chinmoy Ghosh, Harley E. Ryan, Lingling Wang","doi":"10.2139/ssrn.3771515","DOIUrl":"https://doi.org/10.2139/ssrn.3771515","url":null,"abstract":"We show that firms report lower CEO-employee pay ratios when they use complex methods to identify the median employee, whose total pay is the denominator in the ratio. Firms choose complex methods when their headquarter states have stronger prosocial attitudes toward income equality and when CEO compensation is higher. Neither industry nor compensation design differences explain this choice. We find no evidence that firms make pay changes to reduce the pay differential between CEOs and general employees. Together, our results suggest that some firms strategically estimate pay ratios in response to social pressure, which alters the efficacy of compensation disclosure.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128031836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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 (either product market competitors or complementors along the value chain) to change their actions in ways that ultimately favor shareholders. We thus provide a formal analysis of the “doing well by doing good” adage. We also provide conditions such that the mission statement game has the nature of a pure coordination game. Our framework thus provides a natural theory of firm leadership in a CSR context: by selecting a CSR mission statement, a first mover effectively leads the industry to a Pareto optimal equilibrium.
{"title":"Strategic Leadership in Corporate Social Responsibility","authors":"R. Albuquerque, Luís M. B. Cabral","doi":"10.2139/ssrn.3925843","DOIUrl":"https://doi.org/10.2139/ssrn.3925843","url":null,"abstract":"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 (either product market competitors or complementors along the value chain) to change their actions in ways that ultimately favor shareholders. We thus provide a formal analysis of the “doing well by doing good” adage. We also provide conditions such that the mission statement game has the nature of a pure coordination game. Our framework thus provides a natural theory of firm leadership in a CSR context: by selecting a CSR mission statement, a first mover effectively leads the industry to a Pareto optimal equilibrium.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128660449","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Berkovitch, D. Israeli, A. Rakshit, Suhas A. Sridharan
We investigate whether a firm's corporate social responsibility (CSR) activities engender investor trust. Motivated by the observation that investor trust facilitates greater informational price efficiency, we address our question by examining the relation between CSR and three dimensions of stock price discovery: (1) the speed with which stock prices reflect earnings news, (2) the level of investor uncertainty around earnings announcements, and (3) earnings response coefficients. We find robust evidence that CSR enhances investor trust in firms. Specifically, we find that firms with more CSR enjoy faster incorporation of earnings news into stock prices, lower investor uncertainty around earnings announcements, and higher earnings response coefficients. Using a regression discontinuity design, we identify the causal effect of CSR on the speed with which stock prices reflect earnings news. Our inferences are robust to controls for characteristics of reported earnings and firms' information environment, as well as alternative measures of CSR.
{"title":"Does CSR Engender Trust? Evidence From Investor Reactions to Corporate Disclosures","authors":"J. Berkovitch, D. Israeli, A. Rakshit, Suhas A. Sridharan","doi":"10.2139/ssrn.3858135","DOIUrl":"https://doi.org/10.2139/ssrn.3858135","url":null,"abstract":"We investigate whether a firm's corporate social responsibility (CSR) activities engender investor trust. Motivated by the observation that investor trust facilitates greater informational price efficiency, we address our question by examining the relation between CSR and three dimensions of stock price discovery: (1) the speed with which stock prices reflect earnings news, (2) the level of investor uncertainty around earnings announcements, and (3) earnings response coefficients. We find robust evidence that CSR enhances investor trust in firms. Specifically, we find that firms with more CSR enjoy faster incorporation of earnings news into stock prices, lower investor uncertainty around earnings announcements, and higher earnings response coefficients. Using a regression discontinuity design, we identify the causal effect of CSR on the speed with which stock prices reflect earnings news. Our inferences are robust to controls for characteristics of reported earnings and firms' information environment, as well as alternative measures of CSR.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129480157","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the extent to which the labor market facilitates the diffusion of tax-planning knowledge across firms. Using a novel data set of tax department employee movements between S&P 1500 firms, we find that firms experience an increase in their tax planning after hiring a tax employee from a tax-aggressive firm. This finding is robust to various research designs and specifications. Consistent with tax-planning knowledge driving the result, we find that the tax-planning benefits are more substantial when the employee is involved in a director-level role and has more experience. Further tests suggest that tax-planning knowledge is highly specific in nature: the increase in tax avoidance is larger when the hiring and former firms are similar (i.e., operating in the same sector or having similar foreign operations), and firms are more likely to hire tax department employees from firms with similar characteristics. Finally, we do not find that the prior firm’s tax planning changes after the employee leaves the firm, suggesting that the tax-planning knowledge simply spreads to the hiring firm and does not leave the prior firm. Our study documents the first order role of the labor market in the diffusion of tax-planning knowledge across firms, and our findings suggest that tax department human capital is a central determinant of tax-planning outcomes. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4741 .
{"title":"Tax Planning Knowledge Diffusion via the Labor Market","authors":"John M. Barrios, John Gallemore","doi":"10.2139/ssrn.3837396","DOIUrl":"https://doi.org/10.2139/ssrn.3837396","url":null,"abstract":"We examine the extent to which the labor market facilitates the diffusion of tax-planning knowledge across firms. Using a novel data set of tax department employee movements between S&P 1500 firms, we find that firms experience an increase in their tax planning after hiring a tax employee from a tax-aggressive firm. This finding is robust to various research designs and specifications. Consistent with tax-planning knowledge driving the result, we find that the tax-planning benefits are more substantial when the employee is involved in a director-level role and has more experience. Further tests suggest that tax-planning knowledge is highly specific in nature: the increase in tax avoidance is larger when the hiring and former firms are similar (i.e., operating in the same sector or having similar foreign operations), and firms are more likely to hire tax department employees from firms with similar characteristics. Finally, we do not find that the prior firm’s tax planning changes after the employee leaves the firm, suggesting that the tax-planning knowledge simply spreads to the hiring firm and does not leave the prior firm. Our study documents the first order role of the labor market in the diffusion of tax-planning knowledge across firms, and our findings suggest that tax department human capital is a central determinant of tax-planning outcomes. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4741 .","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116765965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
John W. Barry, Murillo Campello, J. Graham, Yueran Ma
We use timely surveys of US CFOs to study how flexibility shapes companies’ responses to the onset of the COVID-19 crisis and drives longer-term changes in the corporate sector. The three dimensions of corporate flexibility that we study perform distinct functions, yet complement each other. We find that workplace flexibility, namely the ability for employees to work remotely, plays a central role in modulating firms’ employment and investment planning during the crisis. Investment flexibility allows firms to increase or decrease capital spending plans based on their business condition during the crisis, which is shaped by workforce flexibility. Finally, financial flexibility contributes to stronger employment and investment plans. We show that the role played by workplace flexibility is new and was absent during the 2008 financial crisis. CFOs expect the workplace transformation of 2020 to have lasting effects for years to come: high workplace flexibility firms foresee continuation of remote work, stronger employment recovery, and shifting away from traditional capital investment, whereas low workplace flexibility firms will rely more on automation to replace labor.
{"title":"Corporate Flexibility in a Time of Crisis","authors":"John W. Barry, Murillo Campello, J. Graham, Yueran Ma","doi":"10.2139/ssrn.3778789","DOIUrl":"https://doi.org/10.2139/ssrn.3778789","url":null,"abstract":"We use timely surveys of US CFOs to study how flexibility shapes companies’ responses to the onset of the COVID-19 crisis and drives longer-term changes in the corporate sector. The three dimensions of corporate flexibility that we study perform distinct functions, yet complement each other. We find that workplace flexibility, namely the ability for employees to work remotely, plays a central role in modulating firms’ employment and investment planning during the crisis. Investment flexibility allows firms to increase or decrease capital spending plans based on their business condition during the crisis, which is shaped by workforce flexibility. Finally, financial flexibility contributes to stronger employment and investment plans. We show that the role played by workplace flexibility is new and was absent during the 2008 financial crisis. CFOs expect the workplace transformation of 2020 to have lasting effects for years to come: high workplace flexibility firms foresee continuation of remote work, stronger employment recovery, and shifting away from traditional capital investment, whereas low workplace flexibility firms will rely more on automation to replace labor.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124400045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the common refrain of “good governance” that pervades contemporary discourse and the maturation of corporate governance as an industry oriented toward serving shareholders and their interests. As for the present, our analysis explains why the corporate social responsibility movement transformed into shareholder value-oriented ESG, stakeholder capitalism became relegated to a new separate form of entity known as the benefit corporation, and public company boards of directors became homogenized across industries. As for the future, our analysis suggests that absent a major paradigm shift, advocacy pushing corporations to consider the interests of employees, communities, and the environment will likely fail if such effort is not framed as advancing shareholder interests.
{"title":"The Corporate Governance Machine","authors":"D. S. Lund, Elizabeth Pollman","doi":"10.2139/SSRN.3775846","DOIUrl":"https://doi.org/10.2139/SSRN.3775846","url":null,"abstract":"The conventional view of corporate governance is that it is a neutral set of processes and practices that govern how a company is managed. We demonstrate that this view is profoundly mistaken: in the United States, corporate governance has become a “system” composed of an array of institutional players, with a powerful shareholderist orientation. Our original account of this “corporate governance machine” generates insights about the past, present, and future of corporate governance. As for the past, we show how the concept of corporate governance developed alongside the shareholder primacy movement. This relationship is reflected in the common refrain of “good governance” that pervades contemporary discourse and the maturation of corporate governance as an industry oriented toward serving shareholders and their interests. As for the present, our analysis explains why the corporate social responsibility movement transformed into shareholder value-oriented ESG, stakeholder capitalism became relegated to a new separate form of entity known as the benefit corporation, and public company boards of directors became homogenized across industries. As for the future, our analysis suggests that absent a major paradigm shift, advocacy pushing corporations to consider the interests of employees, communities, and the environment will likely fail if such effort is not framed as advancing shareholder interests.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122055353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study compliance of Indian firms to the 2013 Corporate Social Responsibility (CSR) regulation that mandates qualifying firms to spend 2 percent of the pre-tax profits on CSR. We demonstrate that the formation of CSR committees and the appointment of directors with relevant experience (CSR-Directors) increase compliance to the CSR law by 11 percent. Further, we show that CSR-Directors improves compliance by implementing a cost-effective CSR strategy by reducing the number and geographic spread of CSR projects. CSR directors are more likely to implement a cost-effective CSR strategy for companies in more competitive industries, companies with high debt, and companies with no previous history of CSR. Companies with higher CSR compliance gain in value and have increased creditworthiness.
{"title":"Director Expertise and Compliance to Corporate Social Responsibility Regulations","authors":"Swarnodeep Homroy, Wentao Li, Nassima Selmane","doi":"10.2139/ssrn.3743453","DOIUrl":"https://doi.org/10.2139/ssrn.3743453","url":null,"abstract":"We study compliance of Indian firms to the 2013 Corporate Social Responsibility (CSR) regulation that mandates qualifying firms to spend 2 percent of the pre-tax profits on CSR. We demonstrate that the formation of CSR committees and the appointment of directors with relevant experience (CSR-Directors) increase compliance to the CSR law by 11 percent. Further, we show that CSR-Directors improves compliance by implementing a cost-effective CSR strategy by reducing the number and geographic spread of CSR projects. CSR directors are more likely to implement a cost-effective CSR strategy for companies in more competitive industries, companies with high debt, and companies with no previous history of CSR. Companies with higher CSR compliance gain in value and have increased creditworthiness.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124806216","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine whether and how creditor monitoring affects corporate social responsibility (CSR) activities through the observable event of debt covenant violations. Covenant violations shift the control rights to creditors, allowing creditors to strengthen monitoring on firm policies. Employing a quasi-regression discontinuity design, we document differential effects of creditor monitoring on various components of CSR activities: firms tend to reduce CSR activities related to employee and community welfare, while leaving activities largely intact on the components that can have long-term adverse reputational effects on the firm. We also find that the reduction in CSR activities occurs primarily in situations where managerial agency problems in CSR activities tend to be more severe. Our findings provide evidence that creditors play a role in shaping CSR.
{"title":"Creditor Monitoring and Corporate Social Responsibility: Evidence from Covenant Violations","authors":"Luo He, Jingjing Zhang, Ligang Zhong","doi":"10.2139/ssrn.3727652","DOIUrl":"https://doi.org/10.2139/ssrn.3727652","url":null,"abstract":"We examine whether and how creditor monitoring affects corporate social responsibility (CSR) activities through the observable event of debt covenant violations. Covenant violations shift the control rights to creditors, allowing creditors to strengthen monitoring on firm policies. Employing a quasi-regression discontinuity design, we document differential effects of creditor monitoring on various components of CSR activities: firms tend to reduce CSR activities related to employee and community welfare, while leaving activities largely intact on the components that can have long-term adverse reputational effects on the firm. We also find that the reduction in CSR activities occurs primarily in situations where managerial agency problems in CSR activities tend to be more severe. Our findings provide evidence that creditors play a role in shaping CSR.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133076829","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Narratives drive conversations. They serve a framing purpose and offer a lens through which we enter a discussion, make sense of an issue and find meaning in our world. Ultimately, they shape decisions. When it comes to conversations about how people are affected by business conduct and the global economy, a number of distinct narratives are influencing decision-makers today: the development narrative of sustainability; the political narrative of inequality; the economic narrative of stakeholder capitalism; the investment narrative of ESG performance; and the accounting narrative of human and social capital. All of these narratives co-exist, yet they also compete for attention. In this working paper, Caroline Rees explains why continuing down this siloed approach could result in each of these narratives becoming unnecessarily diluted and falling short of its aims. By contrast, she proposes that the narrative of business of human rights – grounded in global normative standards and a focus on those people most vulnerable to harm from business practices – can be of central relevance in bringing these other five narratives together, and helping them achieve a goal they all share: a world in which business gets done with respect for the basic dignity and equality of everyone.
{"title":"Transforming How Business Impacts People: Unlocking the Collective Power of Five Distinct Narratives","authors":"C. Rees","doi":"10.2139/ssrn.3717914","DOIUrl":"https://doi.org/10.2139/ssrn.3717914","url":null,"abstract":"Narratives drive conversations. They serve a framing purpose and offer a lens through which we enter a discussion, make sense of an issue and find meaning in our world. Ultimately, they shape decisions. When it comes to conversations about how people are affected by business conduct and the global economy, a number of distinct narratives are influencing decision-makers today: the development narrative of sustainability; the political narrative of inequality; the economic narrative of stakeholder capitalism; the investment narrative of ESG performance; and the accounting narrative of human and social capital. All of these narratives co-exist, yet they also compete for attention. \u0000 \u0000In this working paper, Caroline Rees explains why continuing down this siloed approach could result in each of these narratives becoming unnecessarily diluted and falling short of its aims. By contrast, she proposes that the narrative of business of human rights – grounded in global normative standards and a focus on those people most vulnerable to harm from business practices – can be of central relevance in bringing these other five narratives together, and helping them achieve a goal they all share: a world in which business gets done with respect for the basic dignity and equality of everyone.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129088472","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Hindsight tells us that COVID-19, thought by Trump and others to have come out of nowhere, is more aptly labelled a “gray rhino” event, one that was highly probable and one that we had the power to prevent. Indeed, despite considerable evidence of the impending threats of pandemics, for the most part, pandemic preparation was ignored, resulting in wide-scale social and economic losses. The lessons from COVID-19 however should remind us of the perils of ignoring gray rhino risks. Nowhere is this more apparent than with climate change, a highly probable, high impact threat that has largely been ignored to date. Despite those who deny climate change, there remains ample evidence of the increasing temperature of the earth, which like COVID-19, has the potential not only to create public health emergencies but also to create wide scale, enormous adverse impacts on the economy. Indeed, the risks posed by climate change to the economy have the potential to be so far-reaching that it should, as this article argues, be termed a systemic risk. As such, the economic implications of climate change need to be mitigated in order to preserve economic stability. This is necessary not only for prudential and economic reasons, but also to protect citizens’ health and safety, and to ensure that business does not exceed the limits of the planet. While there has been some attention to addressing the economic implications of climate change at the global level, progress in the US has been minimal. This is surprising, not only because climate change has already caused unprecedented damage in certain parts of the country, but also because, to some extent, existing legislation and models may offer the tools to address the systemic risks of climate change. Drawing inspiration from the Dodd-Frank Act, SEC rules, and the FDIC model, among others, this article proposes regulatory approaches for mitigating climate change systemic risks in hopes that COVID-19 does not foreshadow our fate for climate change.
{"title":"Climate Change as Systemic Risk","authors":"B. Choudhury","doi":"10.2139/ssrn.3704962","DOIUrl":"https://doi.org/10.2139/ssrn.3704962","url":null,"abstract":"Hindsight tells us that COVID-19, thought by Trump and others to have come out of nowhere, is more aptly labelled a “gray rhino” event, one that was highly probable and one that we had the power to prevent. Indeed, despite considerable evidence of the impending threats of pandemics, for the most part, pandemic preparation was ignored, resulting in wide-scale social and economic losses. \u0000 \u0000The lessons from COVID-19 however should remind us of the perils of ignoring gray rhino risks. Nowhere is this more apparent than with climate change, a highly probable, high impact threat that has largely been ignored to date. Despite those who deny climate change, there remains ample evidence of the increasing temperature of the earth, which like COVID-19, has the potential not only to create public health emergencies but also to create wide scale, enormous adverse impacts on the economy. \u0000 \u0000Indeed, the risks posed by climate change to the economy have the potential to be so far-reaching that it should, as this article argues, be termed a systemic risk. As such, the economic implications of climate change need to be mitigated in order to preserve economic stability. This is necessary not only for prudential and economic reasons, but also to protect citizens’ health and safety, and to ensure that business does not exceed the limits of the planet. \u0000 \u0000While there has been some attention to addressing the economic implications of climate change at the global level, progress in the US has been minimal. This is surprising, not only because climate change has already caused unprecedented damage in certain parts of the country, but also because, to some extent, existing legislation and models may offer the tools to address the systemic risks of climate change. Drawing inspiration from the Dodd-Frank Act, SEC rules, and the FDIC model, among others, this article proposes regulatory approaches for mitigating climate change systemic risks in hopes that COVID-19 does not foreshadow our fate for climate change.","PeriodicalId":210981,"journal":{"name":"Corporate Governance: Social Responsibility & Social Impact eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130338494","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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