Predictors of Organizational Decoupling in the Context of Corporate Sustainability

Abstract

The gap between what firms say and what they do is referred to as organizational decoupling. Despite the fact that decoupling is a widespread phenomenon, there is a paucity of empirical studies that have examined individual level predictors of organizational decoupling, especially in the context of corporate sustainability. In this dissertation, utilizing upper echelon theory, I examine how CEO psychological charactersitics predict policy-practice decoupling in the environmental and social dimensions of corporate sustainability. Using a sample of U.S.manufacturing companies from S&P 1500 during the period 2009-2018, I test the relationship between CEO personality (FFM traits), CEO value (self-transcendence), and CEO cognition (cognitive complexity) and policy-practice decoupling in the environmental and social dimensions of corporate sustainability. The study finds support for positive relationships between CEO extraversion and CEO neuroticism, and policy-practice decoupling in the environmental dimension. The study also finds support for negative relationship between CEO agreeableness and policy-practice decoupling in the environmental dimension. The results negative relationships between CEO openness to experience and cognitive complexity and policy-practice decoupling in the social dimension. The study did not find support for the relationship between self-transcendence and policy-practice decoupling both in the environmental and social dimensions. The proposed moderating effect of board power on the relationships between CEO psychological characteristics and policy-practice decoupling in the environmental and social dimension were not supported. The study uses novel techniques such as computer-aided textual analysis and machine learning models to measure CEOs’ psychological characteristics. Policy-practice decoupling in the context of corporate sustainability was measured using Sustainalytics ESG ratings indicators. An alternate measure for decoupling was developed using GRI reports, 10Ks, and Asset 4 ESG ratings. Similarly, CEO psychological characteristics are measured using open language approach and closed language approach. The study also uses two different sources of CEOs texts to derive psychological characteristics measures. The dissertation aims to contribute to both literatures on organizational decoupling and upper echelons. Developing an empirical measure for policy -practice decoupling may contribute to future empirical research on decoupling, especially in the context of corporate sustainability. Identification of the antecedents of decoupling will enable us to understand how and why decoupling occurs in organizations. Examining psychological characteristics of CEOs as antecedents will advance TMT research by moving beyond the reliance on demographic proxies that characterizes most prior research. The study concludes by discussing the limitations and providing directions for future research.