CEO power and CSR: the moderating role of CEO characteristics

Abstract

PurposeThe purpose of this study is to examine the moderating role of the characteristics of the chief executive officer (CEO) on the association between CEO power and corporate social responsibility (CSR) performance.Design/methodology/approachThis paper conducts multiple regression analyses to empirically test the proposed hypotheses based on a sample of US-based publicly held companies. The sample period extends from 2000 to 2018. Firm-level CSR ratings are obtained from the Kinder, Lydenberg and Domini (KLD) database (currently known as MSCI ESG STATS). Financial data and CEO data are retrieved from Compustat and ExecuComp databases, respectively. Additional test and robustness analysis are performed.FindingsThis paper shows that firms with more powerful CEOs are less likely to engage in CSR activities. The negative association between CEO power and CSR is found to be exacerbated by CEOs who are younger, more competent and overconfident; however, this negative association is mitigated by CEOs who are female. This paper also finds that gender plays a more important role among CEO characteristics. Collectively, the findings highlight the potential opportunities to better understand the role of various CEO characteristics that jointly affect CSR.Originality/valueFirst, this is the first study providing a comprehensive empirical analysis of how various CEO characteristics jointly affect CSR. Prior studies that focus on standalone CEO characteristics offer an incomplete picture of the relation between a single CEO characteristic and a firm's CSR performance. The current study thus extends the research field by examining the association between seemingly unrelated CEO characteristics and CSR performance. The results also highlight that gender is the critical factor moderating the relationship between CEO power and CSR performance when it is compared with CEO age, ability and overconfidence. Second, the authors add to the literature on employee selection by showing that female CEOs mitigate the negative effect of managerial power on CSR performance. Although the currently available empirical research in management control systems focuses on ex-post analyses of moral hazard mitigation for incumbent employees, both the economics and management literature acknowledge ex ante evidence suggesting that employee selection is even more important. Our findings may provide insight into the selection of CEOs.

What kind of leaders can promote the disclosure of information on the sustainable development goals?

“…Secondly, in addition to identifying the individual CEO attributes that independently affect SDG reporting, we also analyze the effect of the interaction among the different CEO attributes on SDG reporting. In this sense, we add novel evidence to the limited research of how several CEO attributes jointly affect CSR initiatives (Chu et al, 2022; Villalba‐Ríos et al, 2022). We show that some CEO attributes, when combined with others, can produce stronger or contradictory effects on SDG reporting and thus answer the question posed by Villalba‐Ríos et al (2022) by providing empirical evidence that CEO profile matters for CSR activities.…”

“…Considering that (1) it is possible that, individually considered, some CEO characteristics do not have a significant impact on the level of SDG disclosure but may have a significant impact in combination with other CEO attributes (Chu et al, 2022; Villalba‐Ríos et al, 2022), and (2) some of the CEO attributes analyzed in our study can reinforce or inhibit the effect of the remaining ones on SDG disclosure (Khan et al, 2020; Villalba‐Ríos et al, 2022), we conduct a complementary analysis with the aim of looking for the profile of the CEOs that are more likely to foster SDG reporting by their companies. Thus, following Villalba‐Ríos et al (2022, pp.…”

“…Given that CEOs perceive the environment and, consequently value CSR differently (Cordeiro & Sarkis, 2008) depending on their characteristics, cognitive styles, backgrounds, and experiences (Aibar‐Guzmán & Frías‐Aceituno, 2021; García‐Sánchez, Aibar‐Guzmán, et al, 2020), CSR‐related decisions will be biased by the CEO's attributes (Villalba‐Ríos et al, 2022). Thus, prior research has documented the influence of several observable and unobservable CEO attributes on CSR strategies and disclosure policies (e.g., Chu et al, 2022; García‐Sánchez, Aibar‐Guzmán, et al, 2020; Hewa Heenipellage et al, 2022; Lewis et al, 2014; Li et al, 2018; Liao et al, 2019; Manner, 2010; Oh et al, 2016; Petrenko et al, 2016; Tang et al, 2018).…”

“…We suggest that greater emphasis should be placed on the attributes of the key decision maker in the company and analyze their individual and joint effect by showing that some CEO attributes, when combined with others, may produce stronger or contradictory effects on SDG reporting. Thus, our study differs from prior research in that is one of the few studies that (1) considers both observable (education, nationality, and tenure) and unobservable (narcissism) characteristics of CEOs (Hewa Heenipellage et al, 2022), (2) analyzes both the individual and joint effect of these characteristics (Chu et al, 2022;Villalba-Ríos et al, 2022), and (3) addresses the study of the effect of CEO observable and unobservable characteristics in the context of the 2030 Agenda. This broad scope allows us to envision the CEO "profile" that may favor a firm's propensity to disclose SDG information.…”

A gendered discourse on truthful disclosure of financial fraud practices among accountants in China: implications to corporate governance

“…For managers, they must lead by example. They must be trusted leaders by demonstrating and embracing integrity in their decision-making process (Bi et al , 2022; Chu et al , 2022). In other words, they cannot be seen as cutting corners, as this would send an implicit message to the employees that behavior of lesser integrity is tolerated (Chesnut, 2020).…”