Causal Analysis of Stakeholder Interdependencies in 10-K Reports

With rising political debates about the role of environmental, social, and corporate governance (ESG), companies must rethink their prioritization of different stakeholder groups. We thus examine how management represents stakeholder satisfaction and interdependencies. To this end, we extract stakeholder sentiment from 10-K business reports for four different stakeholder groups: customers, suppliers, employees, and shareholders. We then apply the Linear Non-Gaussian Acyclic Models (LiNGAM) method to extract the causal backbone of interdependencies among reported stakeholder satisfaction. Based on these results, we examine implications for effective stakeholder management yielding two main findings: First, we provide empirical evidence for the absence of stakeholder conflicts from management perspectives. We uncover positive interdependencies among several stakeholder groups and the complete absence of negative influences. Second, we uncover a hierarchical structure in sentiment dispersion from external to internal stakeholders. Our results suggest that corporate stakeholder governance is not a zero-sum game and provide concrete suggestions towards effective stakeholder management