Agents for social change? Studying the role of organizational actors in the quest for corporate sustainability

Companies face unprecedented pressures to focus their attention on non-financial environmental, social, and related governance (ESG) outcomes in addition to the traditional emphasis on financial returns. This raises a longstanding and enduring question of interest to strategy scholars – how should companies balance multiple organizational goals? This question is especially critical because the pursuit of multiple goals can highlight conflict among organizational members who hold diverging and often opposing interests. However, there is little evidence around understanding how firms’ goal pursuit may affect its members. In my doctoral dissertation I examine how different organizational actors, such as employees, managers and board of directors, shape and respond to firm strategies aimed at balancing financial and non-financial goals. My doctoral work follows two broad themes. The first theme explores the response of organizational actors to firms’ strategies aimed at pursuing multiple financial and ESG goals (essay 1). The second theme examines the role of actors in shaping firm strategies in response to external pressures demanding the integration of financial and ESG goals (essays 2 and 3). I draw from theories widely employed in strategic management, such as, behavioral theory of the firm, power and resource dependence theory, stakeholder theory, among others, to sharpen my theoretical predictions. Methodologically, I use large-scale observational data, collected from a vast set of proprietary sources, and design quasi-experimental empirical strategies for causal examination of my research questions. In the first chapter of my dissertation, I explore the impact of firm-level selective environmental disclosure on employee evaluations of the firm. Firms often respond to pressures for greater environmental performance and transparency by engaging in partial and self-serving disclosure of their environmental impacts. They employ this strategy primarily for the benefit of external audiences. However, by doing so, they risk alienation of their internal members who possess superior information regarding firms’ strategic intent. I find that employees react negatively to the lack of transparency that follows firm engagement in selective disclosure and unearth hidden costs associated with this strategy. In essays 2 and 3 of my dissertation, I seek to investigate the formation of coalitions at the board level and the subsequent articulation of strategic decisions that firms implement to achieve both financial and material ESG outcomes. The second essay of my dissertation studies changes in corporate board structure as a result of external demands for ESG integration in firm strategy. By bringing both these goals together, companies have the potential to create more joint value, making this an important question to study. A common organizational response to demands for integration is to place powerful individuals in connecting or bridging positions. I explore this in the context of corporate boards and find that board members with joint membership in finance and ESG board committees deliver on ESG issues that are financially material to the firm when these companies face higher stakeholder pressures. In the final essay, I further investigate if these board-level coalitions advance ESG goals and issues that, although peripheral to the firm and its primary financial goal, hold normative significance and benefit broader society. Put together, my dissertation highlights new research and an unfolding agenda for understanding how organizational actors interact, evaluate, communicate, and implement different modes of governance to differentiate and integrate across their various goals, especially across financial and the broader environmental and societal domains.