Moving Towards a Stakeholder Orientation: Evidence from the Analyses of Chief Executive Dismissal

Abstract

In the recent two decades, U.S. business has been increasingly taking a stakeholder orientation, which poses an ideological challenge to the shareholder value logic. However, little is known about how this challenge affected the way corporations are governed. We study the historical evolution of the determinants of chief executive officer (CEO) dismissal in large U.S. firms during 1980-2015. Using event history models, we test for changes over time in the role prior engagement in shareholder-oriented practices (such as business refocusing and workforce downsizing) or corporate social responsibility (CSR) plays in the relationship between poor financial performance and CEO dismissal. We find that, in the late 1980s and 1990s, CEOs were less heavily penalized for poor performance when refocusing and downsizing the corporation and more heavily penalized for CSR activity. In the post-Enron era, CEOs were less heavily penalized for CSR activity, and were not rewarded for refocusing and downsizing. We provide evidence of the evolution of U.S. corporations from a shareholder primacy model towards a more stakeholder-oriented one. We discuss implications for the literatures on institutional theory, performativity, and corporate governance.