Conference Agenda

CEOs engaging in activism have an opportunity to shape how individuals perceive their views on the specific issue they are addressing. Moreover, such activism can prompt individuals to update their perceptions of the CEO’s stance on other social or political issues, as well as their views on the company’s work environment. In a pre-registered experiment, we examine how individuals update their beliefs about CEOs and their companies when exposed to CEO activism. Our findings indicate that individuals adjust their beliefs about the CEO’s views on the focal issue in alignment with the CEO’s stance. Additionally, they revise their perceptions of the CEO’s positions on other social or political issues and the company’s work environment when informed about the CEO’s stance on an individual issue. These results underscore the nuanced and constrained ways individuals update their beliefs about CEOs and firms, with the CEO’s inferred political ideology emerging as a key mechanism influencing these updates.

We examine how social movement organizations (SMOs), particularly third-party rating agencies, can catalyze rapid shifts in social norms among an organizational population. We propose that rating agencies can instigate new social norms by defining appropriate and acceptable standards of performance that prompt organizations to realign their behaviors to mirror these new standards, thereby accelerating changes in shared understandings regarding appropriate firm behavior. We tested our theory by analyzing how members of the S&P 500 index adapted to a new gender diversity rating by KLD Research & Analytics, focusing on the acceptance and implementation of gender diversity standards on corporate boards during the early 1990s. Our results suggest that firms rated for their gender diversity were more likely to increase female board representation, particularly those firms initially not meeting the standard set by the rating agency. This public rating not only shifted behavior, but also shifted the underlying norm for gender diversity among S&P 500 companies. These findings challenge the traditional view that social change is gradual and highlight the potential of ratings as an alternative governance tool for practitioners and policy makers interested in changing corporate behavior.

We examine the effectiveness of both implicit and explicit contracting in linking executive compensation to environmental and social targets ("ES Pay"). Consistent with predictions from contract theory, firms with explicit ES Pay schemes demonstrate better ES performance for targets that can be precisely measured, such as emissions. By contrast, implicit ES Pay schemes are ineffective for targets that are easily measurable. However, they are effective and can even outperform explicit schemes for targets with less precise performance measures, such as community engagement. While our results show that the use of effective ES Pay is uncommon so far, they indicate that firms could improve their ES performance by utilizing explicit contracts for measurable targets and implicit contracts for hard-to-measure targets.