Toxic CEOs, ESG Funds as Watchdogs, and the Labor Market Outcomes

Toxic CEOs, ESG Funds as Watchdogs, and the Labor Market Outcomes

Ugur Lel

Series number :

Serial Number: 
871/2023

Date posted :

January 22 2023

Last revised :

January 22 2023
SSRN Share

Keywords

  • Labor market for CEOs and directors • 
  • Environmental failures • 
  • Ex-post settling-up hypothesis • 
  • EPA enforcements • 
  • socially responsible investors

I examine changes in CEO labor market outcomes following corporate environmental failures. CEOs of firms subject to Environmental Protection Agency (EPA) 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). Results are robust to using state environmental regulations for identification. Overall, these results point to significant reputational repercussions of environmental failures to CEOs and the disciplinary role of SRIs.

Authors

Dr
Real name:
Research Member
University of Georgia