Abstract
This paper examines the influence of CEO career horizon problems on corporate social responsibility (CSR). We assume that as CEOs are getting older, they tend to disengage in CSR due to their shorter career horizons. We further argue that high levels of industry-level discretion (ILD) and blockholder ownership amplify the negative effects of CEO age on CSR. Using a panel sample of US-based firms over 2004–2009, we do not find the main effect of CEO age on CSR, but find support for the moderating effects, such that CEO age is negatively associated with CSR when there are high levels of ILD and blockholder ownership. Therefore, results suggest that CEO career horizon problems matter for CSR when (1) CEOs have sufficient discretion over the firm’s strategic decisions and (2) outside blockholders put more pressure on CEOs to engage in financial earning management.
References
Aguilera, R., Rupp, D., Williams, C., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32, 836–863.
Arora, P., & Dharwadkar, R. (2011). Corporate governance and corporate social responsibility (CSR): The moderating roles of attainment discrepancy and organization slack. Corporate Governance: An International Review, 19, 136–152.
Barker, V. L., & Mueller, G. (2002). CEO characteristics and firm R&D spending. Management Science, 48, 782–801.
Barnea, A., & Rubin, A. (2010). corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71–86.
Barron, J. M., Chulkov, D., & Waddell, G. R. (2010). Top management team turnover, CEO succession type, and strategic change. Journal of Business Research, 64, 904–910.
Baysinger, B., & Hoskisson, R. E. (1990). The composition of boards of directors and strategic control: Effects on corporate strategy. Academy of Management Review, 15, 72–87.
Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review, 71, 443–465.
Boehm, A. (2005). The participation of businesses in community decision making. Business and Society, 44, 144–177.
Bolton, P., Scheinkman, J. A., & Xiong, W. (2006). Pay for short-term performance: Executive compensation in speculative markets. Review of Economic Studies, 73, 577–610.
Brickley, J. A., Lease, R. C., & Smith, C. W. (1988). Ownership structure and voting on antitakeover amendments. Journal of Financial Economics, 20, 267–291.
Buchholtz, A. K., & Ribbens, B. A. (1994). Role of Chief Executive Officers in takeover resistance: Effects of CEO incentives and individual characteristics. Academy of Management Journal, 37, 554–579.
Burke, L., & Logsdon, J. M. (1996). How corporate social responsibility pays off. Long Range Planning, 29, 495–502.
Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements and consequences of top management team composition. Journal of Management, 30, 749–778.
Chang, Y. K., Oh, W. Y., Jung, J. C., & Lee, J. Y. (2012). Firm size and corporate social performance: The mediating role of outside director representation. Journal of Leadership & Organizational Studies, 19, 486–500.
Chang, Y. K., Oh, W. Y., & Messersmith, J. G. (2013). Translating corporate social performance into financial performance: Exploring the moderating role of high-performance work practices. International Journal of Human Resource Management, 24, 3738–3756.
Coad, A., & Rao, R. (2008). Innovation and firm growth in high-tech sectors: A quantile regression approach. Research Policy, 37, 633–648.
Cohen, P., Cohen, J., West, S. J., & Aiken, L. S. (2002). Applied multiple regression/correlation analysis for the behavioral sciences. New York: Lawrence Earlbaum.
Davidson, W. N., Xie, B., & Ning, Y. (2007). The influence of executive age, career horizon and incentives on pre-turnover earnings management. Journal of Management and Governance, 11, 45–60.
Dawkins, J., & Lewis, S. (2003). CSR in stakeholder expectations and their implications for company strategy. Journal of Business Ethics, 44, 185–193.
Dechow, P., & Sloan, R. (1991). Executive incentives and the horizon problem. Journal of Accounting and Economics, 14, 51–89.
den Hond, F., & de Bakker, F. G. A. (2007). Ideologically motivated activism: How activist groups influence corporate social change activities. Academy of Management Review, 32, 901–924.
Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Oxford: Capstone.
Epstein, M. (2008). Making sustainability work. Best practices in managing and measuring corporate social, environmental and economical impacts. San Francisco, CA: Berrett-Koheler Publishers and Greenleaf Publishing.
Fahlenbrach, R., & Stulz, R. (2011). Bank CEO incentives and the credit crisis. Journal of Financial Economics, 99, 11–26.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301–325.
Finkelstein, S., & Boyd, B. K. (1998). How much does the CEO matter? The Role of Managerial Discretion in the Setting of CEO Compensation. Academy of Management Journal, 41, 179–199.
Finkelstein, S., & Hambrick, D. C. (1990). Top-management-team tenure and organizational outcomes: The moderating role of managerial discretion. Administrative Science Quarterly, 35, 484–503.
Godfrey, P. C., Merrill, C. B., & Hansen, J. M. (2009). The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic Management Journal, 30, 425–445.
Gray, S. R., & Cannella, A. A. (1997). The role of risk in executive compensation. Journal of Management, 23, 517–540.
Griffin, J. J., & Mahon, J. E. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business and Society, 36, 5–31.
Grimm, C. M., & Smith, K. G. (1991). Management and organizational change: A note on the railroad industry. Strategic Management Journal, 12, 557–562.
Guthrie, K., & Sokolowsky, J. (2010). Large shareholders and the pressure to manage earnings. Journal of Corporate Finance, 16, 302–319.
Haleblian, J., & Finkelstein, S. (1993). Top management team size, CEO dominance, and firm performance: The moderating roles of environmental turbulence and discretion. Academy of Management Journal, 36, 844–863.
Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Reivew, 32, 334–343.
Hambrick, D. C., & Abrahamson, E. (1995). Assessing managerial discretion across industries: A multi-method approach. Academy of Management Journal, 38, 1427–1441.
Hambrick, D. C., & Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of organizational outcomes. Research in Organizational Behavior, 9, 369–406.
Hambrick, D. C., & Mason, P. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9, 193–206.
Henderson, A. D., Miller, D., & Hambrick, D. C. (2006). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27, 447–460.
Herrmann, P., & Datta, D. K. (2002). CEO successor characteristics and the choice of foreign market entry mode: An empirical study. Journal of International Business Studies, 33, 551–569.
Hox, J. J. (2010). Multilevel analysis: Techniques and applications (2nd ed.). Routledge: New York.
Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42, 564–576.
Kacperczyk, A. (2009). With greater power comes greater responsibility? Takeover protection and corporate attention to stakeholders. Strategic Management Journal, 30, 261–285.
Kaplan, S. N., & Minton, B. A. (2012). How has CEO turnover changed? International Review of Finance, 12, 57–87.
Keats, B. W., & Hitt, M. A. (1988). A causal model of linkages among environmental dimensions, macro organizational characteristics, and performance. Academy of Management Journal, 31, 570–598.
Keegan, J., & Kabanoff, B. (2008). Indirect industry and subindustry-level managerial discretion measurement. Organizational Research Methods, 11, 682–694.
Kumar, P., & Rabinovitch, R. (2011). CEO entrenchment and corporate risk management. SSRN 1760201.
Lawrence, B. S. (1997). The black box of organizational demographics. Organization Science, 8, 1–22.
Levesque, M., & Minniti, M. (2006). The effect of aging on entrepreneurial behavior. Journal of Business Venturing, 21, 177–194.
Liberson, S., & O’Connor, J. F. (1972). Leadership and organizational performance: A study of large corporations. American Sociological Review, 37, 117–130.
Mahapatra, S. (1984). Investor reaction to a corporate social accounting. Journal of Business Finance and Accounting, 11, 29–40.
Mahoney, L. S., & Thorn, L. (2006). An examination of the structure of executive compensation and corporate social responsibility: A Canadian investigation. Journal of Business Ethics, 69, 149–162.
Manner, M. (2010). The impact of CEO characteristics on corporate social performance. Journal of Business Ethics, 93, 53–72.
Matta, E., & Beamish, P. W. (2008). The accentuated CEO career horizon problem: Evidence from international acquisitions. Strategic Management Journal, 29, 683–700.
Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social action: Discovering taxonomy in the Kinder Lydenburg Domini ratings data. Business and Society, 45, 20–46.
McClelland, P. L., Barker, V. L., & Oh, W. Y. (2012). CEO career horizon and tenure: Future performance implications under different contingencies. Journal of Business Research, 65, 1387–1393.
McGuire, J., Dow, S., & Argheyd, K. (2003). CEO incentives and corporate social performance. Journal of Business Ethics, 45, 341–359.
McWilliam, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21, 603–609.
Moore, G. (2001). Corporate social and financial performance: An investigation in the U.K. Supermarket Industry. Journal of Business Ethics, 34, 299–315.
Neter, J., Wasserman, W., & Kutner, M. H. (1985). Applied linear statistical models. Homewood, IL: Irwin.
Oh, W. Y., Chang, Y. K., & Martynov, A. (2011). The effect of ownership structure on corporate social responsibility: Empirical evidence from Korea. Journal of Business Ethics, 104, 283–297.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organizational Studies, 24, 403–441.
Rabe-Hesketh, S., & Skrondal, A. (2005). Multilevel and longitudinal modeling using stata. College Station, TX: Stata Press.
Rajagopalan, N., & Datta, D. K. (1996). CEO characteristics: Does industry matter? Academy of Management Journal, 39, 125–197.
Rodriquez, P., Siegel, D. S., Hillman, A., & Eden, L. (2006). Three lenses on the multinational enterprise: Politics, corruption, and corporate social responsibility. Journal of International Business Studies, 37, 733–746.
Society for Human Resource Management. (2007). Corporate social responsibility in United States, Australia, India, China, Canada, Mexico and Brazil: A pilot study. Alexandria, VA: Society for Human Resource Management.
Stanwick, P., & Stanwick, S. (1998). The relationship between corporate social performance, and organizational size, financial performance, and environmental performance: An empirical examination. Journal of Business Ethics, 17, 195–204.
Udayasankar, K. (2008). Corporate social responsibility and firm size. Journal of Business Ethics, 83, 167–175.
Veiga, J. F. (1983). Mobility influences during managerial career stages. Academy of Management Journal, 26, 64–85.
Waddock, S. A., & Graves, S. B. (1997). The corporate social performance–financial performance link. Strategic Management Journal, 18, 303–319.
Wang, H., Choi, J., & Li, J. (2008). Too Little or Too Much? Untangling the relationship between corporate philanthropy and Firm Financial Performance. Organization Science, 19, 143–159.
Ward, A., Sonnenfeld, J. A., & Kimberly, J. R. (1995). In search of a kingdom: Determinants of subsequent career outcomes for chief executives who are fired. Human Resource Management, 34, 117–139.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Oh, WY., Chang, Y.K. & Cheng, Z. When CEO Career Horizon Problems Matter for Corporate Social Responsibility: The Moderating Roles of Industry-Level Discretion and Blockholder Ownership. J Bus Ethics 133, 279–291 (2016). https://doi.org/10.1007/s10551-014-2397-z
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-014-2397-z