The events surrounding the passage of the Sarbanes-Oxley Act of 2002 (Sarbanes) offer an opportunity to reflect on the influences of public pressure and possible public policy shifts on CSR behavior in a capital market experiencing excessive moral debt. Using the passage of Sarbanes to symbolize a potential public policy shift driven by public pressure, we examine the influence of social legitimacy variables on corporate social responsibility (CSR) behavior before (1991–2001) and after (2002–2005) the passage of the Sarbanes-Oxley Act of 2002. We posit that changes in CSR strategies surrounding the passage of Sarbanes were used to maximize stakeholder interests by addressing social legitimacy involving corporate accountability issues.
Our findings support that CSR behaviors were significantly influenced by the public pressure variables of Sarbanes and company size, but were not significantly influenced by our economic legitimacy control measures, with the exception of a positive significant interaction between Leverage and Sarbanes for CSR Strengths. It appears that post-Sarbanes CSR behaviors were used to address social legitimacy concerns. Further, as CSR Weaknesses ratings exceeded CSR Strengths ratings post-Sarbanes, it appears that transparency of actual CSR performance may have improved post-Sarbanes.