This week’s articles look at the influence CEO behaviour and personality have on CSR decision making in organisations.
How CEOs’ personality and ideology affect firms’ CSR and other strategies
The authors investigate the dispositional sources of managerial discretion by theorizing that CEOs’ personality traits affect the extent to which their firms’ strategies reflect their preferences.
In a longitudinal study of Fortune500 firms, the authors examine the moderating influence of two personality traits—narcissism and extraversion—on the relationship between CEOs’ liberal- or conservative-leaning political ideologies and two firm strategies: corporate social responsibility (CSR) and workforce downsizing. The authors anticipate and confirm that liberal-leaning CEOs are more likely than others to enact CSR practices, and conservative-leaning CEOs are more likely than others to engage in downsizing.
The authors find that extraversion strengthens these effects: it increases liberal CEOs’ use of CSR and conservative CEOs’ use of downsizing. Narcissism likewise strengthens the effect of CEO liberalism on CSR, but it does not significantly moderate the effect of CEO conservatism on downsizing. In a supplementary study using primary data from working professionals, the authors further explore the distinct mechanisms associated with these two personality traits.
The authors find that narcissism relates strongly to individuals’ inflated perception of their discretion, whereas extraversion relates to their ability to sell an issue to others. Our study furthers research on managerial discretion by providing nuanced theory and evidence on innate sources of CEOs’ influence, and it enhances research on CEOs’ political ideology by spotlighting the dispositional boundary conditions of its effects on firms’ strategies.
Abhinav Gupta, Sucheta Nadkarni and Misha Mariam, 2018. Dispositional Sources of Managerial Discretion: CEO Ideology, CEO Personality, and Firm Strategies.
Administrative Science Quarterly, published online July 26, 2018
CEO turnover and the corporate sustainability performance of French firms
This paper examines the relationship between turnover among chief executive officers (CEOs) and corporate sustainability performance (CSP) by identifying the influence of two major types of succession to the top job (internal or external promotion) and the reasons for change. The model also integrates the firm’s past prioritisation of CSP and the impact of a company’s participation in the Global Reporting Initiative (GRI).
Upper echelons theory and agency theory frameworks are adopted to understand CSP. Using an analysis of panel data for 88 public companies across 13 years in France, the authors find that a change of chief executive has a positive and significant effect on CSP 5 years after the change. This positive effect is stronger when the new CEO is recruited from outside the firm. The impact on CSP is invariably positive and significant, except for voluntary departures. The arrival of a new CEO affects CSP less when the firm has already achieved a high standard of CSP and participates in the GRI.
These results are obtained after controlling CSP determinants already validated in the literature (financial performance, size, profitability, etc.). The findings show that expectations of CEOs are not solely economic and financial but also concern CSP. In terms of governance, they should prompt shareholders looking to strengthen CSP to choose new CEOs from outside the firm and to encourage the firm to participate in the GRI.
Yohan Bernard, Laurence Godard and Mohamed Zouaoui. 2018. The Effect of CEOs’ Turnover on the Corporate Sustainability Performance of French Firms.
Journal of Business Ethics, 150(4), 1049–1069.
CEO narcissism increases firms’ vulnerability to lawsuits
Although some researchers have suggested that narcissistic CEOs may have a positive influence on organisational performance (e.g., Maccoby, 2007; Patel & Cooper, 2014), a growing body of evidence suggests that organisations led by narcissistic CEOs experience considerable downsides, including evidence of increased risk taking, overpaying for acquisitions, manipulating accounting data, and even fraud.
In the current study the authors show that narcissistic CEO’s subject their organisations to undue legal risk because they are overconfident about their ability to win and less sensitive to the costs to their organisations of such litigation. Using a sample of 32 firms, the authors find that those led by narcissistic CEOs are more likely to be involved in litigation and that these lawsuits are more protracted. In two follow-up experimental studies, the authors examine the mechanism underlying the relationship between narcissism and lawsuits and find that narcissists are less sensitive to objective assessments of risk when making decisions about whether to settle a lawsuit and less willing to take advice from experts.
The authors discuss the implications of the research for advancing theories of narcissism and CEO influence on organisational performance.
Read this article for free online.
Charles A. O’ReillyIII, Bernadette Doerr and Jennifer A. Chatman. 2018. “See You in Court”: How CEO narcissism increases firms’ vulnerability to lawsuits.
The Leadership Quarterly, 29(3), 365-378.
The queen bee: A myth? The effect of top-level female leadership on subordinate females
The authors investigate the effect of female leadership on gender differences in public and private organisations. Female leadership impact was constructed using a quasi-experiment involving mayoral elections, and the research used a sample of 8.3 million organisations distributed over 5600 Brazilian municipalities.
Our main results show that when municipalities in which a woman was elected leader (treatment group) are compared with municipalities in which a male was elected leader (control group) there was an increase in the number of top and middle female managers in public organisations. Two aspects contribute to the results: time and command/role model. The time effect is important because the results are obtained with reelected women – in their second term – and the command/role model (the queen bee phenomenon is either small, or non-existent) is important because of the institutional characteristics of public organisations: female leaders (mayor) have much asymmetrical power and decision-making discretion, i.e., she chooses the top managers.
These top managers then choose middle managers influenced by female leadership (a role model). The authors obtained no significant results for private organisations. Our work contributes to the literature on leadership by addressing some specific issues: an empirical investigation with a causal effect between the variables (regression-discontinuity design – a non-parametric estimation), the importance of role models, and how the observed effects are time-dependent.
Insofar as public organisations are concerned, the evidence from the large-scale study suggests that the queen bee phenomenon may be a myth; instead, of keeping subordinate women at bay, the results show that women leaders who are afforded much managerial discretion behave in a benevolent manner toward subordinate women. The term “Regal Leader” instead of “Queen Bee” is thus a more appropriate characterisation of women in top positions of power.
Paulo RobertoArvate, Gisele Walczak Galilea and Isabela Todescat. 2018. The queen bee: A myth? The effect of top-level female leadership on subordinate females
The Leadership Quarterly, 29(5), 533-548.
Underpaid and corrupt executives in China’s state sector
This study examines the role of executive compensation in public governance. The authors collect data on corruption cases that involve top-level executives in Chinese listed state-controlled firms. The authors find a significant positive relationship between underpayment of executives and the likelihood of an investigation into corrupt behaviour.
The authors also show that corruption is positively associated with firm performance and that the relationship between underpayment of executives and corruption is influenced by firm performance, suggesting that top managers are more likely to engage in illicit behaviour if they are compensated poorly while the firms under their control perform well.
Finally, the authors find that pay-performance sensitivity decreases when top executives are involved in corruption investigations, indicating a lack of pecuniary incentives. The empirical findings point toward an important relationship between executive compensation and corrupt behaviour, thus providing valuable input to the understanding of executive pay and its effects in China’s state sector.
Xunan Feng and Anders C. Johansson. 2018. Underpaid and Corrupt Executives in China’s State Sector.
Journal of Business Ethics, 150(4), 1199–1212.
CEO of Puma: Leaders’ cognitive complexity and corporate sustainability
In this longitudinal study, the authors explore the co-evolution of the cognitive complexity of the CEO of Puma, Jochen Zeitz, and his view and initiatives on sustainability. Our purpose was to explore how the changes in a leader’s mindset relate to his/her views and actions on sustainability.
In contrast to previous studies, the authors adopt an in-depth longitudinal case study approach to capture the role of leaders’ cognitive complexity in the context of corporate sustainability. By understanding the cognitive development of Zeitz as leader of Puma, the authors provide an important step toward understanding the co-evolution of leaders’ cognitive complexity and proactive corporate sustainability initiatives over time.
Our findings show that as he developed a more complex mindset that also included non-business lenses, Zeitz developed a more inclusive understanding of sustainability and adopted proactive initiatives that went beyond business-as-usual. Our study also demonstrates that a longitudinal perspective can offer valuable insights for a better understanding of how individuals and their interactions affect and are affected by an organisation’s strategies and performance, in corporate sustainability and beyond.
Stefan Gröschl, Patricia Gabaldón and Tobias Hahn. 2017. The Co-evolution of Leaders’ Cognitive Complexity and Corporate Sustainability: The Case of the CEO of Puma.
Journal of Business Ethics, 2017.
The Power of One to Make a Difference: How Informal and Formal CEO Power Affect Environmental Sustainability
The authors theoretically discuss and empirically show how CEO power based on environmental expertise and formal influence over executives and directors, in the absence and presence of shareholder activism, spurs firms toward greener strategies.
Our results support the idea that CEOs with informal power, grounded in expertise, reduce corporate environmental impact and this relationship is amplified when the CEO also enjoys formal power over the board of directors. Additionally, the authors found that any source of CEO power, whether informal or formal, is a good catalyst for transforming shareholder activism into corporate greening.
However, in the absence of such activism, only CEOs’ informal environmental expert power acts as a determinant of firm environmental performance.
Judith L. Walls and Pascual Berrone. 2017. The Power of One to Make a Difference: How Informal and Formal CEO Power Affect Environmental Sustainability.
Journal of Business Ethics, 145(2), 293–308.