The impact of CEO celebrity on CSR Performance
Bachelor thesis:
Student Niek van Spronsen
Student ID 10784403
Supervisor Drs H. Fasaei
Specialization Business Administration
Statement of originality
This document is written by Student Niek van Spronsen who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
Over the past years Corporate Social Responsibility has gained its importance and has received a lot of attention from the media and. Corporate Social Responsibility is often explained as the concern of the needs of society, which goes beyond the
economic needs of the company. This research examines the relationship between the celebrity status of a CEO and Corporate Social Responsibility performance.
The reason why there is chosen for this subject has to do with the gaining attention Corporate Social Responsibility is receiving from the media and the fact that
celebrities are considered products of the media. Therefore this research examines the relation between the two.
The Corporate Social Responsibility performance is measured by three different factors: employee satisfaction, corporate governance and environmental
sustainability. The results of this study indicate that CEO celebrity indeed has a influence on the Corporate Social Responsibility performance. This effect was only significant for the effect of CEO celebrity on employee satisfaction. For the other two parameters there were no significant results. Nevertheless this study found that there is a effect between CEO celebrity and Corporate Social Responsibility. Therefore managers of firms should take it into account.
Table of content
1. Introduction ... 5
2. Literature review ... 8
2.1 CEO celebrity ... 8
2.2 Corporate Social Responsibility ... 9
2.3. Different dimensions of CSR performance ... 11
2.3.1 Employee satisfaction ... 12
2.3.2 Corporate Governance ... 14
2.3.3 Environment ... 15
3. Methodology ... 17
3.1 Sample ... 17
3.2 measurement of CEO celebrity ... 17
3.2.2 Measurement of CSR performance ... 18
3.2.3 control variables ... 19
4. Results ... 20
4.1 descriptives ... 20
4.2 the regression ... 22
4.2.2. CEO Celebrity and employee involvement (hypothesis 1). ... 22
4.2.3 CEO celebrity and corporate governance (hypothesis 2). ... 23
4.2.4. CEO celebrity and the environment (hypothesis 3). ... 24
5. Discussion and conclusion ... 25
Biography ... 27
Introduction
Nowadays companies and their business management are more transparent then ever. This has everything to do with the shift towards social media. People can follow the actions of the company by exploring the Internet.
As a result, the actions of the CEO’s today are constantly being watched.
On 16 march 2015, Elon Musk tweeted “ Some People seem to think I tweet to affect share price, this is false. A brief rise in $TSLA stock obviously does no good for Tesla or me”. By the end of the trading day the stock rose with 3.5% (Quora, 2016).
This tweet from Elon Musk shows the impact of his status on the (financial) world. A consequence of this impact is that CEO’s have to be more careful than in the past. The actions of the CEO are being watched by the whole world, therefore the CEO has to make sure that the stakeholders are being satisfied.
Because of the visibility of the CEO’s decisions, the reputation of the CEO has gained its importance. Existing literature even speaks of “CEO Celebrity”. According to Hayward, Rindova and Pollock (2004) CEO celebrity is a circumstance due to journalist who broadcast the attribution of a firm’s positive performance, which has been caused by the actions of the CEO. Ranft, Zinko, Ferris and Buckley (2006) state that CEO celebrity can serve as an intangible asset and therefore may increase the opportunities of the firm. According to their research it could also enhance the image of the firm and the morality of the employees or stakeholders.
However existing literature also shatters light on the downside of CEO
celebrity. For instance, if a CEO celebrity acts in an unethical manner, it will probably lead too much more media attention than a firm without a famous well-known CEO (Ketchen, Adams and Shook, 2008). Ketchen et al. also mentioned the negative attention a firm can receive when the actual performance of the firm doesn’t match the high expectations of the firm with a CEO celebrity. In addition, firms with a CEO celebrity are getting more exposure then firms that do not. The more frequently individuals are getting exposed to information the more likely they consider the information as true (Hawkins and Hoch, 1992). It could be that the celebrity of the firm thinks he or she controls everything. The celebrity CEO of Google, Eric
the CEO of the firm is not the only responsible matter that can affect the firm’s reputation, likely the reputation of the firm depends on its actions as well
After discussing the previous literature it becomes clear that the celebrity of the CEO has influence on the way people look at the firm.
Another concept that influences the way people judge at the firm is “corporate social responsibility” (CSR). CSR is defined by Hackston and Milne (1996) as “the
provision to the stakeholders of non-financial information relating to a company’s interaction with its physical and social environment”. Bayoud and Kavanagh (2012) stated that one of the benefits of CSR is that it can enhance the reputation and financial performance.
A key aspect of the corporate reputation is the stakeholder’s perception. According to Unerman (2008) CSR is a powerful medium to influence these perceptions. And by influencing the perceptions of the stakeholders the performance of the firm could be enhanced.
The existing literature focuses on the effect of CSR on the way people look at the firms. Hereby it seems CSR is a tool for performance, but so far it has been mainly a one-way street. There is little to no research on the relationship between the CEO and CSR. Both CSR and the CEO celebrity influences the way people look at a company, but there has been no research in how these two things influence each other. This is where we find a gap in the existing literature. Therefore this thesis will investigate the relationship between the celebrity of the CEO and the CSR
performance. The research question on of this thesis is: “How does the celebrity status
of a CEO influence the CSR performance of the firm?”
Instigating the relationship between the celebrity of the CEO and the CSR performance will contribute in the following matter. First of all the results would give the CEO’s and managers insight in whether it would be beneficial to invest in the celebrity of the firm. If the celebrity of the CEO boosts the CSR performance and the firms wants to engage more in CSR, they can decide that they would give the CEO more public attention. The results of this paper will also contribute to existing literature. Not only it will provide a review on the impact of CEO celebrity and CSR performance, which to this day hasn’t been done, but it also gives a basis for future research. If the relationship between the two is known, then future research could
investigate what kind of celebrity has the most (positive) influence on the CSR performance. This would give CEO’s a guideline how to present themselves to the crowd.
To answer the research question the CSR performance will be measured with secondary data. The data are received from the MSCI (formerly KLD) database. According to Waddock and Graves (1997) this is the best and most used database to measure CSR performance.
The celebrity status of the CEO will be compared with three different measurements of CSR. These measurements are: employee satisfaction, corporate governance and the environment. The reason why is chosen for those three measurements will be further discussed in chapter 2.3.
The CSR performance is measured on different levels because of the broad definition of CSR in the existing literature. By comparing the celebrity of the CEO with
different levels of performance this paper aims to shatter light on the impact of the celebrity of the CEO and which aspects of the CSR performance are most influenced by their celebrity status.
This thesis will be organized as follows. First, literature reviews are presented. After the review there will be a theoretical framework where the hypothesis will be formed. This framework will be followed by the mythology in which the research will be discussed in further detail. Afterwards there will be a summa of results, followed by a conclusion and discussion. At the end a literature list is presented.
2. Literature review
2.1 CEO celebrity
In order to define the concept of a CEO celebrity it’s best to define the concept of a celebrity in general. Gamson (1994) defines a celebrity as a social actor who gains large public attention and has a profit- generating value. Celebrity does not necessary insure success. It rather increases the economic opportunities. Celebrities often generate a positive emotional response. This is because they often fulfill behavioral needs, such as affiliation (Gamson, 1994). Note that this fulfillment does not have to be actually achieved. Rindova et al., (2006) state that a celebrity is not a characteristic of the person in general. It’s based on the relationship of that person with the
audience. To be more precise, a relationship that is recognized by the media (Rindova et al., 2006). This means that simply reporting the news wont be enough. The media should engage with its audience. The media must be aware of the audience interest to meet the audience demands. These interests used to be in the form of entertainment. But nowadays these interests exist in the business industry as well. Therefore the CEO’s of companies are considered celebrities.
Celebrities depend on the public attention they are receiving (Alberoni, 1972). CEO’s attract media attention through spectacular successful actions (Treadway et al., 2009). There are different ways to become a celebrity. One way is bye corporate advertising. Another method is through a network of media (Guthey et al., 2009). According to Hayward and Rindova (2004) celebrity CEO’s arise when journalist broadcast the attributions of the CEO of the performance of the firm. In this
definition, the CEO celebrity has three components. The first one is that journalists broadcast these attributions of the CEO to the media. The second one is all of the causes of the firm’s actions that lead to the (positive) performance of the firm. The third one is that all of the actions should be attributed to the CEO. Hereby celebrity does not arise from factors other than the actions of the CEO, for instance luck or environmental actions (Hayward & Rindova, 2004).
The actions of a CEO must stand out in order to achieve large media attention This can be achieved by operating the same way as other firms with success. However it is more common to deviate the norm. Deviant and shocking behavior is more in line with the entrepreneurial spirit and is more likely to gain public attention (Hayward et al., 2004).
This research is about the celebrity status of the CEO. The focus lies on the celebrity aspects. Therefore this research distinguishes celebrity from reputation, which appears to share multiple similarities. Existing literature recognizes (CEO) celebrity as a construct distinct from reputation (Treadway, Adams, Ranft & Ferris, 2009).
Treadway et al., (2009) explain that perhaps the best distinction between celebrity and reputation, by mentioning three different areas by which celebrity arises as an
intangible asset different from reputation. The first area is that celebrity comes from mass communication and reputation comes from signaling. Second, reputation is based on the ability to generate value. However celebrity is based on the assumption that a person can build an attractive social identity. Finally, Treadway et al., explain that reputation is a result of strategic action and that (CEO) celebrity is a result of media creation.
2.2 Corporate Social Responsibility
Corporate Social Responsibility has gained in importance in business. Bhattacharya et al., (2004) quotes that “ Not only is doing good the right thing to do, but it also leads to doing better”.
CSR has shifted from an ideology to something many consider necessary for
organizations to contribute to their society (Lichtenstein et al., 2004). As a result CSR is a well-known topic. however despite the many articles that has been written about CSR, untill this day it doesn’t have a clear universal definition. In fact there are many different definitions of the concept, which overlap. Votaw (1972) wrote, “Corporate social responsibility means something, but not always the same thing to everybody”. In this section of the article different insights on the topic will be discussed.
Eells and Walton (1974) gave a broader definition of CSR. They argued that
corporate social responsibility is a concern of the needs of society, which goes beyond the economic needs.
Jones (1980) state that CSR is a concept where corporations are responsible for different groups in society other than the stockholders and everybody who is connected by contract.
Carroll’s (1991) theory will be explained in a little more detail, since his vision had a great impact on the theories of CSR
He had a different approach and suggested to focus on four aspects. The four aspects are: economic, legal, ethical and philanthropic. Carroll (1991) points out that if CSR is to be accepted as legitimate, it has to address the entire spectrum of
obligations a business has to society, including the most important one, the economic obligation.
Carroll (1991) gathered the four aspects into a pyramid model (figure 1). The
economic aspect is basically about making profit. Without profit a business won’t be able to exist, therefore the economic aspect can be seen as the foundation of the business. The legal aspect is about coping with the laws and regulations while operating the business. The ethical responsibilities embrace all of the activities that are expected by the society. These are the activities to be expected, but not prescribed by law. The philanthropic responsibilities encompass those actions that lead to good corporate citizenship. These are actions that lead to better human welfare and
goodwill. The difference with the ethical responsibilities is that the philanthropic ones are not expected in a moral sense (Carroll, 1991).
Figure 1- (Carroll, 1991)
Cannon (1992) argues that the main focus of the firm should be delivering goods and services. However, according to him, the business is depending on the society that the
business can only contribute to society when it is efficient, profitable and social responsible. This means that the business aspect of the firms should come first, but in order to deliver goods and services a firm should contribute to its society.
There seem to be no clear definition of the concept CSR. However there is definitely some overlap in the definitions given by the many authors described above. CSR has something to do with the organization trying to pay attention to the
economical needs and the needs of society. Watts and Holme (1999) describe it as continuing commitment by an organization to behave ethically and contribute to economic development, while also improving the quality of life of its employees, the community and the society at large.
The literature used in this research is rather old, but important to mention. This is because the literature often refers to the literature from Cannon (1992) and Carrol (1991). Shabana (2010) mentions in his research that the pyramid of social
responsibility (economic, legal, ethical philanthropic) is such an important basis for the concept of CSR because it has been successfully used for researches purposes over 25 years and therefore very relevant.
During the past years more different definitions for the concept of CSR occurred. Many of these definitions have an overlap, for instance Kotler and Lee (2005) define CSR as a commitment to improve the community well being through business practices. This is in line with the other definitions, because most of the definitions have the aspect of thinking about the stakeholders while continuing the general business operations. The overlap in the literature makes the dated literature still relevant for this research.
2.3. Different dimensions of CSR performance
There have been a lot of different views on what the definition of CSR should be. Yet another problem is how CSR could be expressed in a way of performance.
Carroll (1979) introduced a model with a basic definition of social responsibility. He stated that social responsibility is the total range of obligations a business has to society. These obligations should consider the economic, legal, ethical and
discretionary categories of business. Later he incorporated these four categories into the pyramid (Carroll, 1979). Later Schwartz and Carroll (2003) came up with an
alternative approach based on three core domains. These domains are: Economic, legal and ethical.
After this approach Wood (1991) presented a model of corporate social performance, which contains principles of CSR. It contains the principles of CSR, expressed on institutional, organizational and individual level. It also contains the processes of corporate social responsiveness. For instance stakeholder management, issues management and the environmental assessment (Wood, 1991).
It becomes clear that there are many theories on how CSR performance should be measured. Therefore this paper focuses on a specific part of CSR, since covering all parts would not be possible in the time schedule. As mentioned before the CSR performance will be measured in three categories: Employee satisfaction, corporate governance and the environment. These three categories are related to the three processes of corporate responsiveness of Wood (1991).
Furthermore there has been chosen for these three measurements based on a personal interest. Considering that a company should take care of his employees and all of the other stakeholders within the firm (employee satisfaction, and of course the
environmental issues our generation is struggling with.
For obtaining data, the KLD index will be used as discussed in the introduction. This is a tool that is used for CSR performance measurement before.
In the next chapters each of the chosen measurements will be discussed and there will be explained why these categories are related to CSR.
2.3.1 Employee satisfaction
Smiths (2003) stated that by dedicating amounts of cash donations in cause
marketing, employee volunteerism programs, companies are anticipating that CSR is “ not only the right thing to do, but also a smart thing to do”.
The fairness theory by Ambrose (2002) suggests that employee attitude can be influenced by the extend to which employees consider the actions of the organization to be fair. Rupp, Ganapathi, Aquilera and Williams (2006) state that employees are likely to react positively to fair behavior, even when the behavior has no direct benefits for themselves. The result is that what the organization does to both the
employees or other stakeholders, can affect the attitudes of the employees (Rupp et al., 2006)
Employees are the kind of stakeholders who directly contribute to the success of the company. Understanding the reactions of the employees on CSR may help to understand the effects of CSR on firms and the processes responsible for them as well (Bauman & Skitka 2012). Bauman and Skitka (2012) express the effect of CSR on employees through four basic psychological needs. These needs are (1) a sense of security and safety that their material needs will be met, (2) a positive social identity that gives the employee self-esteem, (3) the feeling of belongingness and social validation of important values and (4) a deeper sense of purpose at work (Bauman & Skitka, 2012).
This paper will provide a brief overview on how CSR can contribute to these four needs and thus employee satisfaction.
CSR activities can improve employee relations, which may have an affect on the feeling of safety of the employee. Formal policies direct issues such as working conditions, training and developing programs, which can give the employee the feeling the company wants to contribute to general fairness and corporate morality. This builds trust in the company and reduces the fear of exploitation (Aguilera, Rupp, Williams & Ganapathi, 2007; Rupp, 2011) and gives the employees a feeling of trust and safety.
Bauman and Skitka (2012) mention that people desire a positive image of themselves. CSR activities contribute to positive distinctiveness when they increase the prestige of the organization (Ashforth & Mael, 1989). This prestige can help employees to obtain the feeling that they stand out in comparison to others. This will give the employees a feeling of self-esteem.
With regard to point 3, the employee’s feeling of belongingness, CSR can contribute in the following way. CSR can influence the amount of similarity or dissimilarity people perceive between themselves and the organization. This is based on the self-categorization theory. This theory claims that people use prototypes to determine the similarity between themselves and the other within a group (Bauman& Skitka, 2012). People seem to affiliate with people who are similar to them. CSR can serve as a basis for comparison between groups and a source of group-based esteem.
It may shape the way employees perceive the value similarity of the group and therefore enhances the sense of belongingness (Ashforth & Mael, 1989).
The last psychological need described by Bauman and Skitka (2012) is the deeper sense of purpose of the employee. Bauman and Skitka (2012) state that one of the most important roles of CSR should be giving the employees a sense of meaning. CSR activities can give employees the opportunity to provide and help others. This could enhance the meaning and the purpose of the employee’s position at work (Grant, 2007).
The research from Bauman and Skitka (2012) and the other researches have shown that there is a relation between CSR and employee satisfaction. This relation and the investigation on CEO celebrity have led to the following hypothesis:
H1: “ The celebrity of the CEO has a positive influence on CSR performance
concerning employee satisfaction”.
2.3.2 Corporate Governance
According to (Durden, 2008) Corporate Governance (CG) is the creation and
implementation of process seeking in order to optimize the returns to the shareholders while satisfying the legitimate demand of the stakeholders. CG is defined as the system by which companies are directed and controlled (Cadbury, 2000). A broader explanation of the concept is that CG is concerned in all the ways parties are
interested in the well being of the stakeholders (Singh &Davidson, 2003).
The ASX Corporate Governance Council brings together various business groups in order to offer valuable expertise on governance issues (Council, 2007). The ASX describe corporate governance as the framework of rules, relationships, systems and processes by which authority is exercised and controlled within companies.
Freeman (1983) explains the stakeholder notion in his research. He states that there are groups to whom the company is responsible. These groups are other groups than the regular stockholders. These groups have a certain “stake” in the company’s actions. These are the groups without their support the organization would not even exist. Examples by Freemans (1983) are: employees, lenders, customers etc. As a
result strategies need to account for those groups who have an effect on the achievements of the company.
Freeman (1984) states that in order to satisfy the firm’s stakeholders, managers must understand all the processes to manage the relationship with the stakeholders. He defines the capability of the managers to satisfy the stakeholders as the
understanding of conceptual mapping among their stakeholders, the organizational process for dealing with these stakeholders and carrying out the transactions with the stakeholders in order to achieve the organizational purpose (Freeman, 1984).
According to Jensen and Meckling (1976) CG systems can align the manager’s incentives with those of the stakeholders.
Existing literature made it clear that CG can have a positive effect on the satisfaction of the stakeholders. Therefore both CSR and CG share a similarity. They are both concepts that can satisfy the stakeholders. Jensen (2002) and Aguilera, Rupp, Williams and Canapathi (2007) acknowledge this relationship by asserting that both CSR and CG are related to firm’s moral responsibilities towards their stakeholders. Aguilera et al., (2007) assert that CSR increases the firm’s relationship with the stakeholders. They argue that CG mechanisms and the engagement in CSR can resolve conflicts among different stakeholders. As a result, CSR is positively related to CG mechanisms.
The relationship between the two is the reason why CG is chosen as one of the measurements for the CSR performance. This relation and the aim to examine the relationship between CSR performance and CEO celebrity has led to the following hypothesis:
H2: “ The celebrity of the CEO has a positive influence on CSR performance concerning corporate governance”.
2.3.3 Environment
By mentioning “the environment”, this paper focuses on the environment in an ecological sustainable way, not the economic environment in general.
Multinational firms are pressured by all of their stakeholders to engage in social and environmental responsibility (Kolk, 2016).
According to The Economist (2008), ecological sustainability could become the main social responsibility challenge for firms. Therefore managers should be able to determine how their organization can become more responsible in an ecological and sustainable way (Baron, 2001).
Wahba (2008) found in his research that the environment has been one of most important factors in terms of the market’s attitude towards CSR. Welford, Chan and Man (2008) even state that the environment is the most important factor for
stakeholders concerning CSR.
Another reason for engaging in CSR is to preempt advocacy groups to lobby for regulations (Lyon & Maxwell, 2008). Lobbying is often costly for these groups. Lyon and Maxwell (2008) argue that due to these high costs, engaging in CSR can enable the industry to adapt to the regulation with a lower level of abatement than would be required through all of the political processes.
The gain in importance of the environment and the relationship between the environment and CSR are the reasons why is chosen for the environment as a performance measure. The existing literature and the aim of this research has led to the following hypothesis:
H3: “ The celebrity of the CEO has a positive influence on CSR performance concerning the environment”.
When all the hypotheses have been examined and discussed, the research question can be answered: “How does the celebrity status of a CEO influence the CSR
performance of the firm?” By dividing the research questions into sub-questions, this
paper aims to get a better insight in what kind of performance is influenced by the celebrity status of the CEO.
3. Methodology
This chapter will provide information about the methodology of the research. It explains all the variables used in this research. To answer the hypothesis a regression will be conducted. First the measurement of the celebrity of the CEO will be
explained. Then the measurement of CSR performance will be elucidated.
The CEO celebrity will be the independent variable and the performance of CSR will be de dependent variable.
For the control variables this research uses the firm size, risk and industry. The reason why there is chosen for those variables will be explained in chapter 3.1.3.
The data is obtained through the WRDS index over the period of 2015-2016.
3.1 Sample
The data in this research are collected from the companies within the S&P 500 list and are collected within the WRDS database. The CSR performance data are from the KLD index and the control variables are from the COMPUSTAT database.
Both data from the KLD index and the COMPUSTAT data are based on their TICKER codes.
Out of the 500 listed companies of the S&P 500, 416 companies have information about the celebrity status of the CEO. Out of these 416 companies, 83 companies have a CEO who is considered a celebrity and 271 of the CEO’s are considered not celebrity. Of the 416 companies who are used in this research 249 have information about employee satisfaction. For environmental sustainability this amount is 348 and for corporate governance it is 354.
The following paragraphs will provide information about the measurements of CEO celebrity, the measurement of CSR performance and the control variables.
3.2 measurement of CEO celebrity
The data set for the categories of CSR will be collected from the WRDS database. For the data of the CEO celebrities there will be a different approach. Since the role of social media has gained its importance, this research will consider a CEO being a
Twitter has a blue verified badge to let people know that the account of public interest is authentic. The badge appears next to the name on an account’s profile (Twitter, 2018). Accounts that use badges as a profile photo, or in any other way that is not applied from Twitter, will be expanded.
The fact that Twitter acknowledges a person if he or she are considered as important of public interest, is in line with the theory from Gamson (1994), who stated that a celebrity is someone who gains public attention. In chapter 2.1.Is explained that a celebrity could arise through social media (Guthey et al., 2009).
However in the research it became clear that not every CEO is on twitter. In order to get enough data to make the research valid, there is chosen for a second measurement. This measurement is the social media platform “Linkedin”. The reason why there is chosen for Linkedin is because of the way the platform works. Just as Twitter, People who get a lot of attention get a special notification. On linkedin you can “connect” with regular people, but you can “follow” people who are receiving a lot of attention. The second reason for choosing Linkedin is the expectation that more CEO’s use Linkedin than other social media platforms, such as Instagram, because the platform is business-related.
The link between CEO celebrity and social media and media attention is one of the reasons why there is chosen for Twitter and Linkedin as a measurement of CEO celebrity.
The measurement of CEO celebrity will be categorical.
Therefore the CEO’s will receive a “0” if they are considered “not famous” and the CEO’s will receive a “1” if they are considered “famous” according to the standards of Twitter and LinkedIn.
3.2.2 Measurement of CSR performance
The three dimensions of CSR performance will be measured using the MSCI index. The MSCI index used to be named after the founders Kinder, Lynderberg and Domini (KLD). Waddock and Graves (1997) explain in their research why the MSCI/KLD index is such a good method for measuring CSR. The index is an independent rating service that focuses on the assessment of corporate social performance across a range of dimensions related to stakeholders concerns (Waddock and Graves, 1997).
They list several advantages of the KLD/MSCI index. First, all companies of the S&P are rated. Second, each company is rated on multiple attributes which are linked to the corporate social performance. Third, according to Waddock and Graves (1997), there is a single group of workers, which applies the same set of criteria to related
companies. This group is not related to any brokers house or companies, therefore they are not biased. Fourth, all of the criteria’s are applied consistently to a wide range of companies. This means that each company must pass the same criteria. All the data, which has been used to give the concerning firm a score comes not only from internal, but also from external sources (Waddock & Graves, 1997). ]
The measurement of the Performance will divided into the categories
mentioned in the literature review. These categories will receive a “0” if they are not considered to participate in CSR. They receive a “1” if they are considered to be participating in CSR.
3.2.3 control variables
For the control variables this research is based on the theory of (Ullman, 1985; Margolis et al., 2007;Orlitzky, 2001; Waddock and Graves, 1997; McWilliams and Siegel, 2000). They stated that the size, risk and the industry have impact on CSR.
The first control variable for the regression is size. According to Waddock and Graves (1997), size is a relevant control variable, because bigger firms often receive more public attention and therefore they have to respond more to stakeholder
demands The fact that bigger companies might get more attention, makes size a perfect control variable, since CEO celebrity is measured with the mediums Twitter and LInkdin, which are both social media platforms, where it’s about receiving attention from others. To calculate for the size, there was chosen to take the natural logarithm of the total Assets. This is considered the appropriate approach according to McWilliams and Siegel, 2000).
The tolerance for risk influences the attitude towards activities (Waddock and Graves, 1997). According to McWilliams and Siegel (2000), firms with a lower risk tend to invest more in actions that lead to CSR such as recycling, waist management, pollution control or achieve an environmental friendly firm. Therefore risk will be taken as a control variable to measure CSR performance.
Waddock and Graves (1997) used the level of debt as a procurator of the firms risk. This procurator will also be used for the regression of this research. This level of debt was measured by dividing the total debt by the total assets.
Finally the control variable R&D will be used for the regression. Investment in CSR has an influence on the product differentiation and therefore R&D. McWilliams and Siegel (2000) explain that some firms will produce goods and develop services and thereby signal it’s concerns about certain issues to the customer. They state that as a result many products have labels that indicate the use of certain product methods (McWilliams and Siegel, 2000). According to their research, this applies to the process and innovation of the product and therefore research and development (R&D). To measure for the level of R&D there is chosen to divide the total R&D expense by the total Assets (McWilliams and Siegel, 2000).
4. Results
This section will provide information about the results of the data analyses in SPSS. First there will be an explanation of the descriptives where the relation between CEO celebrity and CSR performance will be explained Then the relation between the control variables and the celebrity of the CEO will be checked. Afterwards the regression with all of the variables will be conducted.
4.1 Descriptives
The data is collected from the S&P 500 list. Of these 500 companies 416 had available data in the WRDS database. 354 out of the 416 companies had a
Twitter/LinkedIn account. Therefore n= 354. Out of this 354, the amount of CEO’s that were considered, as a “celebrity” is 83 and 271 is considered “not a celebrity”. First there was chosen to run a “Crosstab” to see if the celebrity of the CEO has impact on the CSR performance in general before the control variables are added. The reason why there is chosen for a cross table is because both of the variables are categorical. There are three different cross tables for each of the CSR performance measurements. The firs measurement: “ Employee involvement” is included in the research report down here. The other two tables are shown in the appendix table 1.2 & table 1.3.
Another reason for the crossable is the fact that there has to be a check if there is there are no empty cells. It wouldn’t be possible to do a regression if there for instance wouldn’t be a value for a “non-celebrity CEO” that would not participate in employee engagement. Fortunately all different categories of the tables have a value as shown in the table below and the appendix.
Table 1. Descriptive: Cross table CEO celebrity and Employee involvement. Celebrity 0 Celebrity 1 Total
Employee 0 122 44 166
Employee 1 47 36 83
Total 169 80 249
As presented in the table above there is a clear difference in the amount of employee satisfaction for CEO’s who are considered a celebrity than for CEO’s who are not ((36/80 = 45%) > ((47/169=27.8%).
Afterwards there is a Chi-square test conducted to check if the difference is significant. The Pearson Chi-Square value was 7,220 with a p value of 0.007 < a=0.05.
After controlling for the variables of CEO celebrity and CSR performance, the research continues with the measurements of the control variables.
The descriptives of the control variable are presented bellow in table 2.
Table 2.CEO Celebrity and control variables.
Size Risk R&D
N (valid) 338 338 338
N (missing) 78 78 78
Mean 8.448 1.805 0.060 Std. Dev. 1.124 2.141 0.106
4.2 The regression
This section will provide information on the regression analysis conducted for this research. Before the logical regression was conducted a T-test was executed. The reason why there is chosen for a T-test is that two groups are compared (with or without celebrity status). If these two groups are going to be compared, they has to be comparable on the relevant variables (the variables who have influence on the
dependent variable). The T-test tests if these groups have significant differences on those variables.
The results of the T-test are presented in table 2.2 (appendix). The significance for the control variables “size” and “R&D” are significant (0.000 and 0.048). The significance for “risk” is not significant (0.154). Nevertheless since existing literature suggest including risk as a control variable this research will continue using it as a control variable.
After the execution of the T-test a logical regression will be executed. In this research there will be three regressions to test for each of the dependent variables of CSR performance. The results of the regression and the hypotheses will be explained in the following paragraphs.
Before the logical regression took place a group statistics of the CEO celebrity and the control variables are presented in table 2.3, which can be found at the appendix.
4.2.2. CEO Celebrity and employee involvement (hypothesis 1).
As mentioned earlier in this research a logical regression will be executed to control if CEO celebrity has an (positive) influence on employee involvement.
But first an omnibus test will be conducted to control if the control variab les make a more valid prediction. The omnibus test gives a value of 0.053. This is not absolute significant but it is close to significance and therefore it makes the estimation a better than without the control variables.
After the omnibus test this research controls the so called “ODS” which will appear in SPSS as “Exp(B)”.
The value for Exp (B) is 2.360 with a significance of 0.011 <a=0.05.
The value of 2.360 implicates that the change that a CEO contributes in employee satisfaction is 2.360 as much for a CEO is considered a celebrity than for a CEO who
is not a celebrity. The interval of Exp (B) lies between 1,2 and 4,5. This interval indicates that a celebrity CEO has 1.2-4.5 more effect on employee engagement than a non-celebrity CEO (table 3).
The result of the logical regression is significant (0.011); therefore there is enough evidence to conclude that the celebrity of the CEO has a positive influence on employeesatisfaction if there is controlled for size, risk and R&D.
The results of the regression are presented in the table below. Note that the regression is focused on the relation between CEO celebrity (1) and employee satisfaction. These results are in the top row of table 3
Table 3 CEO celebrity and employee satisfaction (including control var.)
Wald Sig. Exp (B) Lower Upper
Celebrity (1) 6.469 0.011 2.360 1.218 4.573 Size 0.165 0.684 0.941 0.701 1.263 Risk 1.090 0.297 0.902 0.742 1.095 R&D 0.329 0.567 2.070 0.172 24.908 Constant 0.100 0.0752 0.172
4.2.3 CEO celebrity and corporate governance (hypothesis 2).
To control for the influence of CEO celebrity on corporate governance a regression analysis will be executed. The results of the regression are available in the appendix table 3.2.
As can be found in the appendix, the Exp (B) is 5.406. This is rather large and would indicate that the chance that a CEO contributes in corporate governance is 5.406 times as large for a CEO who is considered a celebrity than for a CEO who is not.
However the significance is (0,180), which is not significant. Therefore there is not enough evidence to conclude that the celebrity of a CEO has any influence on the engagement in corporate governance.
A explanation for this could be the amount of CEO’s in the S&P 500 who participated in corporate governance. The amount of CEO’s that contributed in corporate
governance are available in the cross table 1.2. (Appendix).
4.2.4. CEO celebrity and the environment (hypothesis 3).
To control for the relation of CEO celebrity and their concern about the environment a regression is executed in the same way as for the other two hypotheses. First the Omnibus test was executed to check if the control variables would make the
regression more reliable then without the control variable. The Omnibus test resulted in a significance of 0.004. Therefore there is enough evidence to conclude that the control variables would give a more precise prediction than without the control variables.
The ODS of a CEO who has a concern with the environment is 37,9 % higher (Exp (B) = 1.379) for a CEO who is considered a celebrity than for a CEO who is not considered a celebrity. The interval of the Exp (B) is between 0.0789 and 2.409. Unfortunately the results are not significant (0.260). Therefore there is not enough evidence to conclude that the celebrity status of a CEO indeed raises the CEO concern with employee satisfaction.
5. Discussion and conclusion
The aim of this research was to find out if a celebrity status of the CEO has influence on the CSR performance concerning employee satisfaction, corporate governance and the environment. To answer the research question a regression with secondary data out of the WRDS database has been conducted.
The research question was divided into three questions in the form of hypotheses. The results indicate that the celebrity status of the CEO indeed has a positive influence on CSR performance concerning employee satisfaction. This hypothesis was based on the existing literature from Baumand and Skitka (2012) and the other writers mentioned in the literature review (chapter 2.3.1). The results for the first hypothesis are significant.
The results did not give enough evidence to confirm the two other hypotheses about CEO Celebrity and the influence on corporate governance and the
environmental concerns. The results showed that CEO celebrity does have a positive influence on corporate governance, but unfortunately this result was not significant. The results were not significant for the relationship between CEO celebrity and the environment as well. As a result it is difficult to state that the celebrity status of a CEO has convincingly effect on CSR performance. Unfortunately there was not enough evidence to support for the other two hypotheses. These hypothesis were based on the literature from Lyon and Maxwell (2008) and the other writers mentioned in the chapter’s 2.3.2 /2.3.3.
However the results do indicate that the celebrity status of the CEO can have a positive effect on employee satisfaction. Therefore managers should consider
investing in the celebrity status of the CEO if they want to improve the employee engagement. The results also imply that managers could consider boosting the celebrity status of the CEO if they want to improve the corporate governance and the environmental sustainability. However they must be careful, because the results did not provide significant evidence for these effects.
There are a few limitations of this research. These limitations could be the reason why the research does not confirm all of the hypotheses.
For instance one limitation could be the way in which CEO’s are categorizes as celebrities. Possibly there are different ways to consider someone a celebrity. This
future research should consider the possibility that CEO’s might not have a social media account. Therefore other ways to consider someone (in this case a CEO) a celebrity could be conducted. Second, the companies used in this research are from the S&P500. The list of companies is focused on the largest companies of America, therefore the results are not generalizable for smaller companies or companies who are not based in America.
Other researchers could use different companies for the estimation of CEO celebrity. Especially, since there were only a few companies from the S&P500 list who
participated in corporate governance (table 1.2, appendix).
Finally another limitation could be the measurement approach for CSR. Despite the theory from Waddock and Graves (1997), who explain why the KLD index is the best measurement for CSR, the KLD index has its limitations. The KLD index gives companies a “1” if the company engages in CSR and a “0” if the
company does not participate in CSR. The fact that this measurement is categorical gives the measurement limitations. This is because companies who engage in CSR a lot and companies who engage just a little bit receive the same score (1).
Therefore a different approach could be measurement that is not categorical.
Considering the limitations of this research it leads to some recommendations for future researchers. First of all future researchers could consider multiple ways to determine if a CEO has a celebrity status. Because of the limited time for the conduct of this research, there is chosen to use only social media accounts. Future researchers may use other sources; such as the frequency someone appears in newspapers or television. Secondly, future researchers may use different or more companies in their research. This would be a solution for the limitation of using companies only out of the S&P 500. To deal with the third limitation of this research, future researchers may use another method to measure CSR performance. Instead of using the KLD index, a reputation index could be conducted. Milton Moskovic (1975) used this method to measure CSR performance.
This study finds that the way a CEO is presented in the media and the way he or she has a certain influence on people may have a positive effect to the satisfaction of the company’s employees and therefore CSR performance.
This research brings indictors for managers to invest in the celebrity status of their CEO and might be helpful in future investigations.
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Appendix.
Table 1.2 Cross table Corporate Governance- CEO Celebrity
Celebrity 0 Celebrity 1 Total
Governance 0 270 80 350
Governance 1 1 3 4
Total 271 83 354
Table 1.3 Cross table Environment- CEO Celebrity
Celebrity 0 Celebrity 1 Total
Environment 0 153 29 182
Environment 1 112 54 166
Total 265 83 348
Table 2.2 Group statistics of CEO celebrity and the control variables.
Celebrity N Mean St. Dev Std. Error Size 1 83 8,9334 1,1801 0,1295 0 193 8,3174 1,0999 0,0792 Risk 1 83 1,4248 1,8168 0,1994 0 193 1,8362 2,3317 0,1678 R&D 1 83 0,0838 0,1018 0,0112 0 193 0,056125 0,1142 0,0082
Table 2.3 T-test of CEO celebrity and Control variables.
t-‐ value Sig. (2-‐tailed) Mean difference Size 4.179 0.000 0.6168
Risk -‐1.431 0.154 -‐0.411
R&D 1.905 0.048 0.0277
Table 3.2 Regression of CEO celebrity and corporate governance.
Wald Sig. Exp (B) lower Upper
Celebrity (1) 1.801 0.180 5.406 0.460 63.561
Size 2.572 0.109 2.201 0.839 5.773
Risk 3.309 0.069 1.414 0.974 2.053
R&D 4.987 0.664 8.706 0.000 153085.46
Constant 4.904 0.008 0.000
Table 3.3 Regression of CEO celebrity and corporate governance
Wald Sig. Exp (B) Lower Upper
Celebrity (1) 1.271 0.260 1.379 0.789 2.409
Size 8.409 0.004 1.437 1.125 1.836
Risk 0.150 0.699 0.976 0.086 1.104
R&D 1.163 0.658 1.673 0.171 16.351
