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

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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.

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Acknowledgments

I especially wish to thank Thomas Poulsen for his insights on statistics. I thank Dana Brown, Francesco Duina, Aleksandra Gregoric, Wenche Gwozdz, Klaus Meyer and Torben Pedersen for their comments on earlier versions of this work and the two anonymous reviewers who provided excellent input. I received helpful insights from participants in seminars at the Copenhagen Business School hosted respectively by the Center for Corporate Governance and the Center for Corporate Social Responsibility. I also presented earlier versions at the 2010 1st Nordic Conference on CSR at the Copenhagen Business School and at the 2010 EURAM Conference in Rome where participants offered useful ideas. Søren Mandrup from the UN Global Compact Office and Felipe Alfonso from the Asian Institute of Management in the Philippines also shared their knowledge with me. Henrik Rasmussen provided first-rate research assistance. I wish to thank the Center for Corporate Governance at CBS and the CBS World Class Program for financial support as well as Deloitte, Copenhagen for access to data. The usual disclaimers apply.

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  1. Department of Business and Politics, Copenhagen Business School, Porcelaenshaven 24A, 2000, Frederiksberg C, Denmark

    Jette Steen Knudsen

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Knudsen, J.S. Company Delistings from the UN Global Compact: Limited Business Demand or Domestic Governance Failure?. J Bus Ethics 103, 331–349 (2011). https://doi.org/10.1007/s10551-011-0875-0

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