How Do Social Norms Travel Across the US? Evidence from CSR Activism

We examine whether the social norms that institutional investors are exposed to in their home locality affect their willingness to support in CSR activism in other parts of the US. We find that the shareholdings of non-local institutional investors from localities with strong CSR norms are positively related to the likelihood that a firm is targeted by a CSR-related shareholder proposal, the percentage of votes cast in favor of that proposal, and the likelihood that the proposal is ultimately successful. Further, we find that these relations are stronger if the target firm is located in an area with weak CSR norms. Thus, our results suggest that non-local institutional investors are influenced by the social attitudes they face at home, and these local norms can affect their support for CSR activism aimed at investees outside their home region. In particular, institutional investors from areas with strong CSR norms act as a conduit for promoting better CSR practices, especially for investees located in areas with weak CSR norms.