How do powerful CEOs influence corporate environmental performance?

This study investigates how powerful chief executive officers (CEOs) affect their firm's environmental performance. Based on a sample of 5222 U.S. firm-year observations, we find that such CEOs positively influence environmental performance and that this effect is more prevalent in profitable firms. This result suggests that powerful CEOs are influential in creating sufficient resources to enhance their firms' environmental performance. They are also typically well established and enjoy the quiet life that predisposes them to prioritize environmental projects. Our results also show that, although firms in polluted industries have lower environmental performance, they are able to mitigate this negative effect when they have powerful CEOs or are more profitable. Our results are robust to a variety of econometric models, alternative measures of environmental performance, and controlling for endogeneity issues.

Automated summary

The study finds that powerful CEOs have a positive impact on a firm's environmental performance, especially in profitable firms. This suggests that powerful CEOs are influential in providing resources to enhance environmental performance. Companies in polluted industries can mitigate lower environmental performance when they have powerful CEOs or are more profitable.