Founder CEOs and corporate environmental violations: Evidence from S&P 1500 firms

Abstract

AbstractThe Chief Executive Officer (CEO), as the principal leader of the firm, plays an essential role in the prevention of corporate misconduct. While all CEOs have a responsibility to reduce incidents of corporate misconduct, not all are equally effective in doing so. In this study, we propose that given their central role in the inception of the firm, their psychological attachment, and stewardship mentality, founder CEO‐led firms exhibit less likelihood and frequency of environmental violations, which are major types of corporate misconduct. Additionally, we explore the possibility that founder CEOs' ability to reduce environmental violations may decline over time as the firm gets older and larger, using insights from organizational life cycle theory. Our analyses of data from major environmental violation incidents among S&P 1500 firms between 2009 and 2018 provide some support for our arguments. Specifically, we found that founder CEO leadership is indeed associated with a reduced likelihood and frequency of environmental violations. Furthermore, we observed that the normally negative relationship between founder CEO leadership and the occurrence of environmental violations turns positive as the firm gets older, consistent with organizational life cycle theory predictions. Implications for research and practice are discussed.