This paper investigates the effectiveness of shareholder strategies–divestment threats (exit) and active engagement (voice)–in driving socially responsible corporate behavior and the conditions under which they succeed. Using a novel classification of U.S. mutual funds based on their portfolio holdings and votes, I find that voice is generally effective, particularly when board directors are up for reelection. The exit strategy, which relies on the threat of stock price depreciation, is effective primarily in firms with high CEO wealth-performance sensitivity. These results suggest that the career concerns of management drive pro-social change when shareholders demand it.
