Competing Voices, Persistent Gaps: Shareholder Proposal Activism and ESG Decoupling

We investigate the occurrence and the persistence of environmental, social, and governance (ESG) decoupling when firms are exposed to heterogeneity in shareholder proposal activism, reflected by the different orientation of shareholder activists and the competing nature of their demands. We find that the greater the extent that shareholder proposals blend financial and social logics, the more likely firms are to respond by adopting policies that are not fully implemented in practice. Our results also suggest that decoupling is more persistent among targeted firms that are exposed to heightened heterogeneity in shareholder proposal activism. Our findings suggest that such heterogeneity not only prompts decoupling but also leads to its persistence, contributing to our understanding about why firms may place their legitimacy at risk to respond to shareholder activism, and the conditions that motivate (or inhibit) such behavior. Our study contributes to the symbolic management literature and the ongoing debate on whether and how shareholders impact societal challenges.