Interrelation between human capital management and ESG engagement: evidence from S&P 500 firms

Abstract

This study investigates the relationship between human capital management strategies and corporate sustainability commitments while also examining the moderating role of CEO tenure in shaping this relationship. Drawing on a panel dataset of 413 S&P 500 companies spanning 2011 to 2023, we empirically tested the impact of various human capital management practices, including employee productivity, technology-enabled training investments, workforce diversity, pay equity, and employee benefits, on firms’ ESG performance. We further explored how CEO tenure influenced the effectiveness of these practices in driving sustainability outcomes. Our findings reveal significant positive associations between human capital management effectiveness and corporate ESG performance, highlighting the importance of talent management strategies in promoting sustainable business practices. Moreover, CEO tenure positively moderates the relationship between human capital management and ESG performance, suggesting that longer-tenured CEOs are better positioned to align their human capital strategies with sustainability goals. This study contributes to the literature by bridging the gap between human capital management and sustainability research, providing empirical evidence of the mechanisms through which talent management practices drive sustainability performance, and highlighting the critical role of leadership tenure in shaping these relationships. Our findings have important implications for corporate governance, strategic leadership, and sustainable human resource management practices and offer insights into how organizations can effectively integrate human capital and sustainability considerations to drive long-term value creation.