IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v176y2022i4d10.1007_s10551-020-04715-x.html
   My bibliography  Save this article

Do Boards Take Environmental, Social, and Governance Issues Seriously? Evidence from Media Coverage and CEO Dismissals

Author

Listed:
  • Jenna J. Burke

    (University of Colorado Denver)

Abstract

This study empirically investigates the dismissal of U.S. CEOs following negative media coverage of environmental, social, and governance (ESG) practices. Extending related literature on the media, ESG, and CEO dismissal, I develop a theoretical framework that considers the media as an influential third party that forms and reflects public opinion about ESG issues. In this role, the media reduces information asymmetry by providing cues on their relative salience and prompting corporate directors to attribute firm-level ESG issues to the CEO, regardless of their involvement in the misconduct. Findings confirm this framework and particularly suggest that coverage of issues in prominent media sources is more likely to result in CEO dismissal. Further, companies that have made public commitments to ESG oversight and those with stronger monitoring are more likely to dismiss the CEO following negative coverage of ESG issues. Overall, this study builds an understanding of how contemporary boards approach the uncertain CEO dismissal decision amidst media coverage of ESG- related misconduct and reflects a shifting norm towards ESG integration at the board-level.

Suggested Citation

  • Jenna J. Burke, 2022. "Do Boards Take Environmental, Social, and Governance Issues Seriously? Evidence from Media Coverage and CEO Dismissals," Journal of Business Ethics, Springer, vol. 176(4), pages 647-671, April.
    • Handle: RePEc:kap:jbuset:v:176:y:2022:i:4:d:10.1007_s10551-020-04715-x
    DOI: 10.1007/s10551-020-04715-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10551-020-04715-x
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-020-04715-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. M. J. Nowak & M. McCabe, 2003. "Information Costs and the Role of the Independent Corporate Director," Corporate Governance: An International Review, Wiley Blackwell, vol. 11(4), pages 300-307, October.
    2. Rodolphe Durand & Jean-Philippe Vergne, 2015. "Asset divestment as a response to media attacks in stigmatized industries," Strategic Management Journal, Wiley Blackwell, vol. 36(8), pages 1205-1223, August.
    3. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(1), pages 25-46, January.
    4. Gunther Capelle-Blancard & Aurélien Petit, 2019. "Every Little Helps? ESG News and Stock Market Reaction," Journal of Business Ethics, Springer, vol. 157(2), pages 543-565, June.
    5. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    6. Alexander Dyck & Natalya Volchkova & Luigi Zingales, 2008. "The Corporate Governance Role of the Media: Evidence from Russia," Journal of Finance, American Finance Association, vol. 63(3), pages 1093-1135, June.
    7. Eliezer M. Fich & Anil Shivdasani, 2006. "Are Busy Boards Effective Monitors?," Journal of Finance, American Finance Association, vol. 61(2), pages 689-724, April.
    8. Piazza, Alessandro & Perretti, Fabrizio, 2015. "Categorical Stigma and Firm Disengagement: Nuclear Power Generation in the United States, 1970-2000," OSF Preprints xqkdj, Center for Open Science.
    9. Jenna J. Burke & Rani Hoitash & Udi Hoitash, 2019. "The Heterogeneity of Board-Level Sustainability Committees and Corporate Social Performance," Journal of Business Ethics, Springer, vol. 154(4), pages 1161-1186, February.
    10. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
    11. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    12. Michael K. Bednar & Steven Boivie & Nicholas R. Prince, 2013. "Burr Under the Saddle: How Media Coverage Influences Strategic Change," Organization Science, INFORMS, vol. 24(3), pages 910-925, June.
    13. Timothy D. Hubbard & Dane M. Christensen & Scott D. Graffin, 2017. "Higher Highs and Lower Lows: The Role of Corporate Social Responsibility in CEO Dismissal," Strategic Management Journal, Wiley Blackwell, vol. 38(11), pages 2255-2265, November.
    14. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    15. Matthew A. Rutherford & Ann K. Buchholtz, 2007. "Investigating the Relationship Between Board Characteristics and Board Information," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(4), pages 576-584, July.
    16. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    17. Zyglidopoulos, Stelios C. & Georgiadis, Andreas P. & Carroll, Craig E. & Siegel, Donald S., 2012. "Does media attention drive corporate social responsibility?," Journal of Business Research, Elsevier, vol. 65(11), pages 1622-1627.
    18. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    19. Coughlan, Anne T. & Schmidt, Ronald M., 1985. "Executive compensation, management turnover, and firm performance : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 43-66, April.
    20. M. López & Arminda Garcia & Lazaro Rodriguez, 2007. "Sustainable Development and Corporate Performance: A Study Based on the Dow Jones Sustainability Index," Journal of Business Ethics, Springer, vol. 75(3), pages 285-300, October.
    21. Alessandro Piazza & Fabrizio Perretti, 2015. "Categorical Stigma and Firm Disengagement: Nuclear Power Generation in the United States, 1970–2000," Organization Science, INFORMS, vol. 26(3), pages 724-742, June.
    22. Joe, Jennifer R. & Louis, Henock & Robinson, Dahlia, 2009. "Managers’ and Investors’ Responses to Media Exposure of Board Ineffectiveness," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(3), pages 579-605, June.
    23. Sadok El Ghoul & Omrane Guedhami & Robert Nash & Ajay Patel, 2019. "New Evidence on the Role of the Media in Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 154(4), pages 1051-1079, February.
    24. Wu, YiLin, 2004. "The impact of public opinion on board structure changes, director career progression, and CEO turnover: evidence from CalPERS' corporate governance program," Journal of Corporate Finance, Elsevier, vol. 10(1), pages 199-227, January.
    25. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, May.
    26. Farrell, Kathleen A. & Whidbee, David A., 2002. "Monitoring by the financial press and forced CEO turnover," Journal of Banking & Finance, Elsevier, vol. 26(12), pages 2249-2276.
    27. Campbell, T. Colin & Gallmeyer, Michael & Johnson, Shane A. & Rutherford, Jessica & Stanley, Brooke W., 2011. "CEO optimism and forced turnover," Journal of Financial Economics, Elsevier, vol. 101(3), pages 695-712, September.
    28. Julian F. Kölbel & Timo Busch & Leonhardt M. Jancso, 2017. "How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk," Strategic Management Journal, Wiley Blackwell, vol. 38(11), pages 2266-2284, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Renhong Wu & Jinbao Li & Yunhai Dai & Xiangdong Shen & Md. Alamgir Hossain, 2024. "Impact of Environmental, Social, and Governance on Innovation in Chinese Listed Firms," Sustainability, MDPI, vol. 16(17), pages 1-24, August.
    2. Luca Menicacci & Lorenzo Simoni, 2024. "Negative media coverage of ESG issues and corporate tax avoidance," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 15(7), pages 1-33, February.
    3. Chunying Zhang & Xiaohui Wu, 2023. "Analyst Coverage and Corporate ESG Performance," Sustainability, MDPI, vol. 15(17), pages 1-21, August.
    4. Yingyu Chen & Jun Ren, 2025. "How does digital transformation improve ESG performance? Empirical research from 396 enterprises," International Entrepreneurship and Management Journal, Springer, vol. 21(1), pages 1-24, December.
    5. Jian Zhou & Xiaodong Lei & Jianglong Yu, 2024. "ESG rating divergence and corporate green innovation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 2911-2930, May.
    6. Yanchao Feng & Rongbing Huang & Yidong Chen & Guoshuo Sui, 2024. "Assessing the moderating effect of environmental regulation on the process of media reports affecting enterprise investment inefficiency in China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.
    7. Gunta Grinberga-Zalite & Andra Zvirbule, 2022. "ESG Investing Issues in Food Industry Enterprises: Focusing on On-the-Job Training in Waste Management," Social Sciences, MDPI, vol. 11(9), pages 1-14, September.
    8. Zhu, Bo & Wang, Yansen, 2024. "Does social trust affect firms' ESG performance?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    9. Anita, Mendiratta & Shveta, Singh & Yadav Surendra, S. & Arvind, Mahajan, 2023. "When do ESG controversies reduce firm value in India?," Global Finance Journal, Elsevier, vol. 55(C).
    10. Xiaoyu Cui & Baolei Qi & Muhammad Jameel Hussain, 2024. "Vendor sustainability performance and corporate customers' supplier selection," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2910-2928, July.
    11. Chuyao Deng & Wenliang Peng & Zhenjiang Dou & Qidi Zhang, 2024. "Environmental Background Directors and ESG Performance: A Perspective on Green Governance," Sustainability, MDPI, vol. 16(23), pages 1-22, December.
    12. Jorge Antunes & Peter Wanke & Thiago Fonseca & Yong Tan, 2023. "Do ESG Risk Scores Influence Financial Distress? Evidence from a Dynamic NDEA Approach," Sustainability, MDPI, vol. 15(9), pages 1-32, May.
    13. Martínez-Ferrero, Jennifer & Ramón-Llorens, M. Camino & García-Meca, Emma, 2024. "CEO narcissism and ESG misconduct," Research in International Business and Finance, Elsevier, vol. 69(C).
    14. Pedro Torres, 2024. "Configurations of corporate governance mechanisms and sustainable development," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2900-2909, July.
    15. Ampedu Raphael & Antwi Agyei Bright & Mang'ati Frank Peter & Boadi Joana Ankobea & Boakye Boateng Gifty & Nunoo Linda Ofeibea & Mensah Cornelius Nii Odoi & Mensah Richmond, 2024. "An Empirical Study on the Influence of ESG Ratings on Earnings Management among Listed Companies in China," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 3678-3693, August.
    16. Jiazhan Gao & Guihong Hua & Baofeng Huo, 2024. "Green finance policies, financing constraints and corporate ESG performance: insights from supply chain management," Operations Management Research, Springer, vol. 17(4), pages 1345-1359, December.
    17. Zhao, Yujie & Zhang, Yichun & Li, Wen & Chan, Kam C., 2024. "Is online interactive media monitoring effective? Evidence from corporate tunneling in China," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    18. Colak, Gonul & Korkeamäki, Timo P. & Meyer, Niclas Oskar, 2024. "ESG and CEO turnover around the world," Journal of Corporate Finance, Elsevier, vol. 84(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jo-Ellen Pozner & Aharon Mohliver & Celia Moore, 2019. "Shine a Light: How Firm Responses to Announcing Earnings Restatements Changed After Sarbanes–Oxley," Journal of Business Ethics, Springer, vol. 160(2), pages 427-443, December.
    2. Yangyang Chen & C. S. Agnes Cheng & Shuo Li & Jingran Zhao, 2021. "The monitoring role of the media: Evidence from earnings management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 533-563, March.
    3. Sadok El Ghoul & Omrane Guedhami & Robert Nash & Ajay Patel, 2019. "New Evidence on the Role of the Media in Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 154(4), pages 1051-1079, February.
    4. Bai, Jing & Tang, Xuesong & Zheng, Yuxin, 2023. "Serving the truth: Do directors with media background improve financial reporting quality?," International Review of Financial Analysis, Elsevier, vol. 85(C).
    5. Sun, Kunpeng & Wang, Dan & Xiao, Xing, 2022. "Another victory of retail investors: Social media's monitoring role on firms' earnings management," International Review of Financial Analysis, Elsevier, vol. 82(C).
    6. Vivek Astvansh & Yen‐Yao Wang & Wei Shi, 2022. "The effects of the news media on a firm's voluntary product recalls," Production and Operations Management, Production and Operations Management Society, vol. 31(11), pages 4223-4244, November.
    7. Gao, Xin & Xu, Weidong & Li, Donghui & Xing, Lu, 2021. "Media coverage and investment efficiency," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 270-293.
    8. Jinsil Kim & Miranda J. Welbourne Eleazar & Seung‐Hyun Lee, 2024. "The influence of media scrutiny on firms' strategic eschewal of lobbying," Strategic Management Journal, Wiley Blackwell, vol. 45(11), pages 2340-2367, November.
    9. Andreou, Christoforos K. & Lambertides, Neophytos & Panayides, Photis M., 2021. "Distress risk anomaly and misvaluation," The British Accounting Review, Elsevier, vol. 53(5).
    10. Siddiqui, Sayla & Shams, Syed, 2023. "Media coverage and patent trolls: A study on US high-tech firms," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    11. Kenneth J. Reichelt & Dechun Wang, 2010. "National and Office‐Specific Measures of Auditor Industry Expertise and Effects on Audit Quality," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 647-686, June.
    12. Hao, Yamin & Li, Shuo, 2021. "Does firm visibility matter to debtholders? Evidence from credit ratings," Advances in accounting, Elsevier, vol. 52(C).
    13. Wei Li & Weining Li & Veikko Seppänen & Timo Koivumäki, 2023. "Effects of greenwashing on financial performance: Moderation through local environmental regulation and media coverage," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 820-841, January.
    14. Devos, Erik & Huang, Jianning & Zhou, Fuzhao, 2021. "The effects of corporate name changes on firm information environment and earnings management," International Review of Financial Analysis, Elsevier, vol. 77(C).
    15. Boulton, Thomas J. & Campbell, T. Colin, 2016. "Managerial confidence and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 375-392.
    16. Stein, Luke C.D. & Zhao, Hong, 2019. "Independent executive directors: How distraction affects their advisory and monitoring roles," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 199-223.
    17. D’Mello, Ranjan & Gruskin, Mark, 2021. "To be or not to be all-equity for firms that eliminate long-term debt," Journal of Empirical Finance, Elsevier, vol. 64(C), pages 183-206.
    18. Feng Guo & Chenxi Lin & Adi Masli & Michael S. Wilkins, 2021. "Auditor Responses to Shareholder Activism," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 63-95, March.
    19. Charles E. Wasley & Joanna Shuang Wu, 2006. "Why Do Managers Voluntarily Issue Cash Flow Forecasts?," Journal of Accounting Research, Wiley Blackwell, vol. 44(2), pages 389-429, May.
    20. Ha, Joohyung, 2019. "Agency costs of free cash flow and conditional conservatism," Advances in accounting, Elsevier, vol. 46(C), pages 1-1.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:176:y:2022:i:4:d:10.1007_s10551-020-04715-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.