An examination of the dimensions of CEO power and corporate social responsibility

Abstract

Purpose This study empirically aims to examine the relation between CEO power and firm engagement in corporate social responsibility (CSR). It undertakes an in-depth analysis of how the structural, ownership and expert dimensions of CEO power affect individual dimensions of CSR. Design/methodology/approach This study uses ordinary least squares and industry fixed-effects regressions. It also uses instrumental variable-generalized method of moment regressions to test the robustness of empirical results. Findings Results indicate that CEO power is negatively related to CSR. However, the relation between CEO power and CSR is influenced by CSR strengths, as power is negatively related to CSR strengths and is not related to CSR concerns. Results also indicate that the structural and ownership dimensions of CEO power are negatively related to CSR, and the expert dimension has no significant effect on CSR. Moreover, results show that CEO power is not related to the product dimension of CSR performance. Research limitations/implications CEO power is measured using the structural, ownership and expert dimensions of power. However, CEOs also acquire power through social networks and connections outside the corporation which is not covered in this study. Originality/value This study uses comprehensive measures of CEO power and CSR. It is the first study that examines the effect of dimensions of CEO power on individual dimensions of CSR performance.

When Do CEOs Engage in CSR Activities? Performance Feedback, CEO Ownership, and CSR

“…These results seem to suggest that prior studies' (e.g., [9]) findings of the positive relationship between CEO ownership and CSR activities may be because most of the firms at the time were facing negative performance feedbacks. In contrast, the findings of prior studies (e.g., [10][11][12]) supporting the negative relationship may be due to underrepresentation of the firms that are performing below their aspirations. At the least, our study suggests the usefulness of considering the PFM in investigating the relationship between CEO ownership and CSR activities.…”

“…Prior studies on the effects of CEO ownership on CSR have found mixed results (e.g., [9][10][11][12][13]). For example, Johnson and Greening [9] argued that ownership empowers executives and enables them to allocate resources among diverse stakeholders in a way that ensures continued stakeholder support in the longer run and found a positive relationship between top management equity and CSR.…”

“…Consistent with prior studies (e.g., [9][10][11][12]), we measured CEO ownership as the ratio of the firm's common shares owned by the CEO to the total amount of outstanding shares of the firm. We obtained information on the CEO's shares from the ExecuComp and the firm's total number of outstanding shares from the CompStat.…”

“…In particular, a group of scholars have emphasized the role of CEOs, building upon the upper echelons theory [2], which states that managerial background characteristics are important antecedents of organizational decisions and performances. For example, this line of research has examined the effects of diverse characteristics of CEOs on CSR, including gender, education, experience [34], hubris [3], political ideologies [4], pay structure [5], tenure [6], career horizon [7], and stock ownership [9][10][11][12].…”

“…According to the agency theory [8], CEO ownership has important strategic implications for a firm's activities and performance, as it more or less aligns the interests of CEOs and shareholders and thereby affects the CEOs' decision making. A group of scholars have thus examined the effects of CEO ownership on the firms' CSR activities and found mixed results (e.g., [9][10][11][12]; see [13] for a review). For example, Johnson and Greening [9] found a positive relationship between top management equity and CSR, whereas Barnea and Rubin [10] and Oh and his colleagues [11] found a negative relationship.…”