The Effect of CEOs’ Turnover on the Corporate Sustainability Performance of French Firms
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This paper examines the relationship between turnover among chief executive officers (CEOs) and corporate sustainability performance (CSP) by identifying the influence of two major types of succession to the top job (internal or external promotion) and the reasons for change. Our model also integrates the firm’s past prioritization of CSP and the impact of a company’s participation in the Global Reporting Initiative (GRI). Upper echelons theory and agency theory frameworks are adopted to understand CSP. Using an analysis of panel data for 88 public companies across 13 years in France, we find that a change of chief executive has a positive and significant effect on CSP 5 years after the change. This positive effect is stronger when the new CEO is recruited from outside the firm. The impact on CSP is invariably positive and significant, except for voluntary departures. The arrival of a new CEO affects CSP less when the firm has already achieved a high standard of CSP and participates in the GRI. These results are obtained after controlling CSP determinants already validated in the literature (financial performance, size, profitability, etc.). The findings show that expectations of CEOs are not solely economic and financial but also concern CSP. In terms of governance, they should prompt shareholders looking to strengthen CSP to choose new CEOs from outside the firm and to encourage the firm to participate in the GRI.
KeywordsCorporate sustainability performance (CSP) Turnover CEO GRI Corporate governance
Chief executive officer
Corporate financial performance
Corporate sustainability performance
Corporate social responsibility
Global reporting initiative
Return on assets
We are grateful to the Vigeo social rating agency for their generosity in providing the ratings they produce. We also thank the three Journal of Business Ethics anonymous reviewers for excellent and highly constructive comments that allowed us to improve our work substantially.
This study was funded by CREGO EA 7317 (Universities of Burgundy & Franche-Comté, France).
Compliance with Ethical Standards
Our manuscript complies to the Ethical Rules applicable for the Journal of Business Ethics.
Conflict of interest
The authors declare that they have no conflict of interest.
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