Toxic Chief Executive Officers; Environmental, Social, and Governance Institutional Investors as Watchdogs; and the Labor Market Outcomes

Ugur Lel ()
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Ugur Lel: Terry College of Business, University of Georgia, Athens, Georgia 30602

Management Science, 2025, vol. 71, issue 7, 5722-5745

Abstract: I examine changes in chief executive officer (CEO) labor market outcomes following corporate environmental failures. CEOs of firms subject to Environmental Protection Agency enforcements experience a decline in labor market opportunities as outside directors and a higher likelihood of dismissal as CEOs. They also receive less shareholder support in directorial elections. These effects are mostly visible in recent years and in firms with significant socially responsible investments (SRIs), and they are robust to using state environmental regulations for identification. Shareholders exhibit particular concern over environmental violations that may subject firms to future legal liabilities. Overall, these results point to significant reputational repercussions of environmental failures to CEOs and the disciplinary role of SRIs.

Keywords: labor market for CEOs and directors; environmental failures; ex post settling-up hypothesis; EPA enforcements; socially responsible investors (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:7:p:5722-5745

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