We investigate the effectiveness of the Carbon Disclosure Project (CDP), a notfor-profit organization that facilitates environmental disclosures of firms with institutional investors, thereby serving as a corporate governance mechanism for shareholders to influence the firm's environmental disclosures. We examine firm characteristics associated with firms' decisions to disclose carbon-related information via the CDP for a sample of 319 Canadian firms over a four-year period. In particular, we examine how firms' decisions to disclose via CDP are associated with shareholder activism, litigation risk, and the opportunity for low-cost positive publicity once requested by the firms' "signatory" investors. Our results also show that management's decision to release climate change data is associated with domestic, but not foreign, signatory investors. We also find that disclosing firms tend to be those from lower polluting industries with less exposure to litigation risk. This suggests that this new form of coordinated shareholder activism may not be successful at altering the behavior of firms that are heavier polluters.
Table principles for business ethics, 1 involves the reconciliation of private interests with the public good [1][2][3]. Moral capitalism, at a time when firms can no longer avoid dealing with the issue of corporate social responsibility (CSR), is becoming a reference in the business world. It is especially true in difficult economic times when it can be argued that social needs are greatest. We have witnessed business leaders, such as Miller [4], coming together to publicly recognize the necessity of participating in the collective effort. Corporate income tax is one mechanism allowing, or requiring, firms to take on a share of this collective effort, since it reallocates part of the wealth they create. In the perspective of moral capitalism, no firm, except maybe what Reidenbach and Robin [5] identify as the amoral organization, should attempt to evade the tax system. The reality is quite different as more or less aggressive tax planning activities to minimize the tax burden undeniably exist. The scandal which revealed KPMG's involvement in tax evasion is unquestionably a notable illustration [6]. The case of Starbucks, abovementioned for their allegiance to moral capitalism, is even more noteworthy as the Seattle-based group was, in the same year, blamed for its practices of tax avoidance in the UK [7]. The relationship between moral capitalism or business ethics 2 and corporate tax conduct is after all not so obvious. Consistent with existing research [8,9], we view tax aggressiveness, a facet of tax avoidance, 3 as downward management of taxable income through more or less aggressive tax planning activities. Given that taxes 1 The Caux Round Table is an international organization of senior business executives founded in 1986 to promote ethical business practices. It met for the first time in 1986 in Caux, Switzerland. The Caux Round Table principles are considered to be the first international code of ethics for business (Asgary and Mitschow, 2002).2 Following Carroll (1991), we consider that ethics and morality are essentially synonymous in the organizational context.3 Except in the section dealing precisely and technically with tax aggressiveness measurement, we do not truly distinguish between 'tax avoidance' and 'tax aggressiveness'. Consequently we use both concepts interchangeably.are an important cost of doing business and an instrument of wealth distribution, tax aggressiveness presents an interesting governance and ethical dilemma as it may be desired by some shareholders but decried by other stakeholders. Tax avoidance seems to be a widespread practice despite increasingly compelling external ethical guidance from such sources as the Caux Round Table and the UN Global Compact. This raises the question as to whether business ethics can be successful when regulations fail and thus be viewed as the taxpayer's last rampart against the urge to escape tax [10]. Do corporations consider their tax obligations fulfilled when they do not break the letter of the law? A 'legalistic' behavior corresponds to a...
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