CEO moral foundations and firms’ environmental, social, and governance performance

Abstract

We examine the impact of CEOs’ moral foundations (MFs) – innate source of moral intuitions – on firms' environmental, social, and governance (ESG) performance. Using a linguistic technique on unscripted texts spoken by 1,860 CEOs of S&P 1500 firms over five years, we found that CEOs with higher binding MFs (i.e., focus on expectations of key stakeholder groups) are associated with lower ESG performance. In contrast, we found that CEOs with higher individualizing MFs (i.e., focus on well-being of individuals in general) are associated with higher ESG performance. Our study contributes to the upper echelons theory by providing evidence that CEO morality matters for ESG outcomes. We add to MFs theory by showing that a bi-dimensional lens on CEO’s morality (i.e., binding vs individualizing) reveals nuances on ESG outcomes.