Three Essays on Strategic Leaders and Corporate Sustainability

Abstract

This dissertation consists of three empirical essays on strategic leaders and corporate sustainability. Through three cumulative studies, the dissertation explores the following questions: (1) How are female and racial minority Chief Executive Officers (CEOs) influenced by institutional pressures to advance contested diversity policies? (2) How does a CEO’s cultural heritage, and under which circumstances, influence corporate sustainability performance? (3) How does the presence of a Chief Sustainability Officer (CSO) affect firms’ resource allocation toward competitive investments? In the first essay, drawing upon upper echelons theory, status perspectives on minority leadership, and institutional theory, I hypothesize that firms led by female CEOs or racial minority CEOs are more likely than those led by white male counterparts to overconform to institutional pressures regarding the promotion of comprehensive transgender-inclusive healthcare benefits. My results indicate that female CEOs tend to overconform to institutional pressures, aligning their actions more closely with these expectations than their male counterparts. However, similar patterns are not observed for racial minority CEOs. In the second essay, drawing upon upper echelons theory and the cultural transmission argument, I argue that CEOs’ inherited cultural values—reflected in their uncertainty avoidance—shape sustainability preferences and influence corporate social and environmental performance. Furthermore, I posit two boundary conditions: first, that CEO bonuses strengthen the relationship between CEO uncertainty avoidance and corporate sustainability performance, and second, that newly appointed CEOs weaken this relationship. My results reveal that CEOs from cultural backgrounds characterized by high uncertainty avoidance are negatively associated with corporate sustainability performance. Additionally, evidence suggests that the negative association between CEOs' uncertainty avoidance index and corporate sustainability performance is stronger when CEOs receive a higher bonus ratio and weaker when they are newly appointed. In the third essay, building on upper echelons theory and the literature on functional executives within top management teams, we argue that CSOs serve as key integrators, transforming interdependencies between social and economic objectives into synergies. Specifically, we examine the relationship between philanthropic donations, R&D expenditures, and advertising expenses in firms with and without a CSO, particularly those with government experience. Results indicate that, on average, the presence of a CSO is associated with a negative relationship between philanthropic donations and strategic investments, with firms reducing expenditures on R&D and advertising when philanthropic donations are present. This effect is significantly stronger when the CSO has a government background. To test our hypotheses, we primarily employed quantitative methods, leveraging longitudinal datasets rich in information on top executives’ traits, cultural origins, career trajectories, corporate philanthropic donations, ESG ratings, and LGBTQ-friendly policies in Corporate America.