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The behavioral theory of corporate governance is employed to investigate the relationship between managerial entrenchment and corporate social responsibility (CSR) engagement. Effective corporate governance is argued to reduce managerial entrenchment, thereby increasing CSR engagement. The role of economic policy uncertainty (EPU) is investigated as a moderating variable in this relationship, such that high levels of EPU will increase the impact of entrenchment on CSR engagement. These arguments are supported using a panel of 386 US firms from 2011 to 2018 representing 3,088 firm-year observations in a variety of industries. In supplementary analysis, the CSR measure is disaggregated in order to provide further insight regarding these relationships as they pertain to the individual CSR dimensions under study. Findings inform research regarding the entrenchment-CSR link in particular environmental contexts. Practical implications include potential governance guidelines for boards of directors; stakeholder management given the policy environment; and the impact of government decisions as they affect policy uncertainty, firm actions, and CSR engagement.

The link between corporate social responsibility (CSR) engagement and firmfinancial performance has been examined in a variety of contexts. We extend thislink to an understudied but important context for strategic decisions: environmentaluncertainty. We draw on stakeholder theory to investigate the potential moderatinginfluence of an increasingly important measure of environmental uncertainty –economic policy uncertainty (EPU), on the CSR-performance relationship. Paneldata analysis of 484 firms using KLD data and the Compustat/Capital IQ databasereveal that EPU appears to moderate the relationship between CSR and financialperformance. Moreover, supplemental analysis reveals that this moderatedrelationship varies when considering individual components of CSR. Implicationsfor both research and practice are suggested regarding managers’ emphases amongvarious CSR initiatives in times of high policy uncertainty.

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