Title: Do Managers Invest in Stakeholder Relationships for Personal Insurance Purposes?

Speaker: Professor Peter Oh (McGill University)

Date: Wednesday, April 1, 2026

Time: 4:30 PM - 5:50 PM

Venue: 90402 International Hall

Abstract:

While prior research largely explains stakeholder investments in terms of firm-level benefits, what motivates individual managers, who have discretion over resource allocation, to invest in stakeholder relationships remains relatively unknown. We examine managers’ motivation for investing in stakeholder relationships, proposing that such investments provide personal insurance-like protection against risks to the managers’ career and wealth when negative events occur. Exploiting the setting of clawback provisions to isolate changes in managers’ personal risk from changes in firm risk, our analysis reveals that firms with clawback provisions in their managers’ compensation contracts invest more in stakeholder relationships, as evidenced by higher corporate social responsibility (CSR) scores. This tendency is more pronounced under conditions that amplify the perceived benefits of such insurance-like protection, namely weaker corporate governance, a higher likelihood of future restatements, substantial CEO compensation at risk, lower manager overconfidence, and greater board discretion in clawback enforcement. Managers with clawback provisions also engage more in prosocial activities (e.g., charity contributions and board memberships of non-profit firms). Additional findings suggest that stakeholder investments motivated by personal risk management lead to more positive media coverage, which can act as a mechanism that shields managers from the consequences of potential misconduct. Our findings extend instrumental stakeholder theory by demonstrating that stakeholder investments also arise from managerial motivations and point to an unintended consequence of clawback provisions on stakeholders and larger communities.