The Impact of Executives\u2019 Gender, Financial Incentives, and Shareholder Pressure on Corporate Social and Ecological Investments

Jochen Theis,Marvin Nipper

doi:10.1007/s41471-021-00122-8

Abstract

Archival research suggests that female executives have an impact on corporate decision-making and generally finds positive associations between female board representation and Corporate Social Responsibility (CSR) performance. However, archival research does not reveal why female executives decide differently in the context of CSR. As this is our starting point, we conduct an experiment and examine executives’ decision-making in terms of CSR investment. While female executives seem to be more oriented towards social and ecological practices, we find strong evidence that participants’ real-world incentive program mainly drives their CSR decision-making. We also examine if selected gender-specific character traits (risk propensity, sustainability attitude, and empathy) cause gender differences in executives’ CSR decision-making. In an exploratory analysis, we furthermore show that executives’ risk propensity affects their CSR decision-making conditional on the level of shareholder pressure they face. Our study contributes to the literature on executives’ decision-making and to the CSR literature by enhancing our understanding of determinants of executives’ CSR decision-making.

Highlights

Just recently, 181 members of the Business Roundtable, a nonprofit association whose members are chief executive officers of major U.S companies, signed a “Statement on the Purpose of a Corporation”, which represents a shift from a strong shareholder orientation to a more modern stakeholder capitalism (Business Roundtable 2019; Gartenberg and Serafeim 2019)
We find that the character traits, which are used extensively in archival studies to explain positive effects of female executives on firms’ Corporate Social Responsibility (CSR) performances, are gender-dependent, we do not find any effects of these character traits on executives’ CSR investment decisions
We include the interaction term of gender and financial goals, as we have an uneven distribution of financial goals over shareholder pressure and gender and the effect of financial goals on CSR investment is stronger for female executives

Summary

Introduction

181 members of the Business Roundtable, a nonprofit association whose members are chief executive officers of major U.S companies, signed a “Statement on the Purpose of a Corporation”, which represents a shift from a strong shareholder orientation to a more modern stakeholder capitalism (Business Roundtable 2019; Gartenberg and Serafeim 2019). While management is generally responsible for the implementation of a firm’s CSR activities (Petrenko et al 2016), the board has a fundamental role in serving as a link to the external environment by representing a broad range of stakeholders and considering CSR issues in a firm’s strategic agenda (Hillman et al 2000; Wang and Dewhirst 1992) In this context, a substantial body of archival research suggests that female board members and female managers are more willing to encourage firms’ stakeholder orientation and CSR performance than their male counterparts (Francoeur et al 2019, 2008; Glass and Cook 2018; Glass et al 2016; Hafsi and Turgut 2013; Harjoto et al 2015).. While some studies suggest that executives’ incentive programs and the level of shareholder pressure are relevant determinants of firms’ CSR activities (e.g. Beddewela and Fairbrass 2016; Dam and Scholtens 2013; Flammer et al 2019), their effect on executives’ individual CSR decision-making has not yet been examined by empirical studies

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Conclusion