CEOs under Pressure

(9/20/12)


One of the most pressing issues in business and environmental research is developing a better understanding of why firms respond differently to pressure from stakeholders, such as investors, NGOs, and consumers.  A forthcoming article by Glen Dowell, assistant professor of management and organizations at the Samuel Curtis Johnson Graduate School of Management at Cornell University, sheds light on this issue. “Difference in Degrees: CEO Characteristics and Firm Responses to Pressures for Disclosure,” co-authored with Johnson doctoral student Ben Lewis and Judith Walls of Concordia University, explores the relationship between the attributes of the CEO and firms’ degree of environmental disclosure following stakeholder pressure.

Educational background is one of the most influential and lasting CEO characteristics, the authors write. This new research focuses specifically on two educational categories—the MBA and legal education. While prior research has often characterized MBAs as being overly conservative, Lewis, Walls, and Dowell suggest that MBAs are both more adept in strategic decision-making than those without an MBA and are more likely to see requests by key stakeholders as opportunities to increase the firm’s value. On the other hand, CEO’s with a legal degree act in a more conservative fashion, and therefore are less responsive to external pressures to disclose.

Consistent with this hypothesis, they find that following pressure from shareholders, firms led by MBAs are more likely to disclose greenhouse gas emissions than firms led by CEOs with other educational backgrounds, while those led by lawyers are significantly less likely to disclose.  With firms subject to growing demands for transparency in their financial and social performance, these findings help to increase understanding of the factors that increase firms’ likelihood of responding to such demands.

Dowell studies the interaction of firms with their natural, institutional, and competitive environments. His principle interest lies in uncovering sources of performance and survival differences among firms, and his research focuses on environmental performance.