Abstract
The growing importance of corporate social responsibility (CSR) for firms’ sustainability has been spurring scholarly attempts at identifying the antecedents of CSR activities. This study examines how CEO ownership differentially affects firms’ CSR activities in response to their performance relative to aspirations. Building upon the agency theory and the performance feedback model, we argue that CEOs with greater ownership are relatively more likely to increase their firms’ CSR activities than those with smaller ownership as their firms’ performance further decreases below or increases above their aspiration levels, because they typically have more discretionary power and a greater pool of behavioral alternatives. Our fixed-effects analysis of the panel data from the U.S. crude petroleum and natural gas industry between 1995 and 2016 found that there is a systematic difference in how firms’ CSR activities are adjusted in response to negative performance feedback depending on the levels of CEO ownership, but no significant difference in the face of positive performance feedback. The overall results imply that the CEOs tend to care about CSR only when performance is near their target and not so much when performance is far below or above the target, especially if their stock ownership is low.
Highlights
Corporate social responsibility (CSR) has become an important determinant of firms’ sustainability due to stakeholders’ growing expectations [1]
According to Frynas [43], “The oil and gas sector has been among the leading industries in championing CSR. . . . oil companies have initiated, funded and implemented significant community development schemes. . . . They participate in partnerships with established development agencies such as the US Agency for International Development (USAID) and the United Nations Development Programme (UNDP)” (p. 581)
We conjecture that the reason is because the oil and gas companies are already engaging in relatively greater levels of CSR activities with or without slack resources, given social pressures for CSR initiatives in this industry
Summary
Corporate social responsibility (CSR) has become an important determinant of firms’ sustainability due to stakeholders’ growing expectations [1]. A group of scholars have examined the effects of CEO ownership on the firms’ CSR activities and found mixed results (e.g., [9,10,11,12]; see [13] for a review). Johnson and Greening [9] found a positive relationship between top management equity and CSR, whereas Barnea and Rubin [10] and Oh and his colleagues [11] found a negative relationship. These mixed findings suggest a need to consider boundary conditions in examining the CEO ownership’s effects on CSR. We incorporate the performance feedback model [14,15] to investigate “when” owner-CEOs are more or less likely to engage in CSR activities than non-owner CEOs
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