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The effect of CEO Power on Greenwashing:

Does the CSR Committee Play a Role?

Iris J. Gort

S2183005

Abstract

This study analyzes the relationship between CEO power and greenwashing. Greenwashing is measured as the gap between environmental disclosure and environmental performance. The level of greenwashing increases due to the information asymmetry between the CEO and the stakeholders. According to the agency theory, this information asymmetry can be reduced by a CSR committee. Therefore, the moderating effect of the CSR committee is also examined. The main role of the CSR committee is to monitor the CEO and to create transparency. To test the hypotheses, a database consisting of 10,013 firm-year observations for 1,600 organizations from 45 countries between 2006 and 2017, is created. The findings show that there is no significant relationship between CEO power and greenwashing. In line with the agency theory, CSR committees have a negative and significant effect on greenwashing. Moreover, CSR committees were found to have a negative and significant effect on the relation between CEO power and greenwashing. However, this study shows that this effect is decreased due to CEO power. In previous research, limited attention has been paid to CEO power and the effect of CEO power on environmental disclosure, greenwashing. Therefore, the most important contribution of this study is to the agency theory by having a closer look at CEO power and the effect of this power on greenwashing. Furthermore, the finding that CEO power reduces the effects of a CSR committee contributes to the agency theory and corporate governance literature.

Keywords: CEO power, CSR decoupling, Greenwashing, CSR performance, CSR reporting, CSR committee, Corporate governance, Agency theory.

Supervisor: N. Hussain

University of Groningen, Faculty of Economics and Business MCs BA: Management Accounting and Control

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Introduction

Organizations all over the world are facing a tremendous amount of pressure to become environmentally sustainable. Corporate Executive Officers (CEOs) are the key decision makers concerning how firms should manage this pressure (Sharma, 2000; Walls & Berrone, 2017). The current world needs CEOs who focus on doing good for the community rather than going for the money. By only going for the money, companies become less trusted. Organizations must bear responsibility for the world in which they operate. However, Paul Polman, CEO of Unilever, soon discovered that his company was not able to do it alone and that he needed support from his competitors, the government and non-governmental organizations. However, it turned out that he had to take this fight on his own, which resulted in the fact that ten years later he still did not achieve the goals he had desperately wanted to achieve. It turns out that Paul Polman underestimated the enormous pressures from external institutions like his competitors, the government and Unilevers’ shareholders (Smit, 2019). Engaging in corporate social responsibility (CSR) is for most organizations a voluntary act (Cheng & Courtenay, 2006; Muttakin, Khan, & Mihret, 2018). Organizations invest in CSR for several reasons. First, some CEOs believe that they have a moral obligation to invest in CSR. The second reason to invest in CSR is the fact that those CSR activities are in line with the financial interests of the organization. The last reason could be that CEOs believe that investing in CSR is increasing their professional or personal reputation (Borghesi, Houston, & Naranjo, 2014).

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terms of CSR” (Sauerwald & Su, 2019, p. 283). CSR consists of three dimensions, namely economic, environment and social (Slaper & Hall, 2011). This study focuses on the environmental dimension of CSR, also called greenwashing.

An increasing number of organizations engage in greenwashing, which means that their environmental reports are decoupled from their actual environmental performance. According to Marquis and Toffel (2012), greenwashing organizations “reveal positive environmental attributes while concealing negative ones, which creates a misleadingly positive impression of their overall environmental performance''. Sustainability is a serious challenge, which many parties try to tackle. The environment and the community is endangered by companies who commit to greenwashing (Markham, Khare, & Beckman, 2014). According to Westphal and Zajac (2013), CEOs play an important role in the decision to engage in greenwashing. CEOs are more likely to use their power when they have to make decisions for a given strategy if they have a personal stake in the issue and when they have the expertise (Walls & Berrone, 2017). Through greenwashing, CEOs can make it seem that the company is meeting the expectations of its stakeholders.

According to the agency theory, the main way to address information asymmetry issues is by forming a specialized board committee, the CSR committee (Kassinis & Vafeas, 2002). This committee has the specialized expertise and experience to make decisions and policies regarding the environmental activities of an organization. The CSR committee can also monitor the activities of the CEO regarding the environmental activities and the related information reported (Dixon-Fowler, Ellstrand, & Johnson, 2017). Due to this committee the transparency between the CEO and the other stakeholders will increase which reduces the information asymmetry.

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performance. The hypotheses are tested using a final sample of 10,013 firm-year observations of 1,600 organizations from 45 countries for the years 2006 to 2017.

A number of studies have been done about the effect of a CSR committee on CSR decoupling and greenwashing. However, little is known about the effect of a CSR committee on the relation between CEO power and greenwashing. This study makes contributions to the agency theory and corporate governance literature. First, CEO power is a under-explored organizational factor. However, corporate leaders have an important role in the decision-making process of an organization since they decide which pressure to prioritize (Walls & Berrone, 2017). Furthermore, this is the first study that investigates the relationship between CEO power and greenwashing. Both subjects have been investigated before, but no study has linked these variables. Lastly, this study contributes to the corporate governance and agency theory literature by exploring the moderating effect of a CSR committee on the relationship between CEO power and greenwashing. The results of this study show that CEO power has no significant relationship with greenwashing. Furthermore, a CSR committee is negatively an significantly related to greenwashing. Importantly, the presence of a CSR committee is significantly and negatively related to the relationship between CEO power and greenwashing.

The remainder of this paper is organized in six chapters. The next chapter will discuss findings of existing literature. The data and methods will be presented in the third chapter. Thereafter, in chapter four the results are presented. A conclusion and discussion are provided in chapter five and six.

Literature review

Agency theory

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shareholders. Despite the fact that CEOs must disclose this information to the shareholders, this information is often limited, and an incomplete representation of reality (Ndofor et al., 2015). According to agency theory, information asymmetry can be reduced by monitoring the CEO by the board of directors and its committees (Connelly & Ireland, 2011).

CSR decoupling and greenwashing

Nowadays, sustainability is everywhere; from green cars to green packaging. Since the concerns of stakeholders about the natural ecosystem have increased, companies are pressured to engage in environmentally responsible conduct (Berrone, Fosfuri, & Gelabert, 2017; King & Lenox, 2002). In response, companies have started to adapt to the sustainability demands of customers and other stakeholders (Vos, 2014). The three main motives to engage in corporate social responsibility is to contribute to society, meet the expectations of stakeholders and generate benefits such as financial advantages (Vos, 2014). In practice, a combination of these three motives are used by organizations. The pressure of stakeholders is one of the strongest motives for organizations to engage in corporate social responsibility because stakeholders are increasingly paying attention to the environmental ethics of a company. In 2018, 10% of all the investors only wanted to invest in organizations that pay attention to corporate social responsibility. This percentage is expected to continue growing in the coming years (De La Gorce, 2019). The presence of pressure from green investors is also noticeable. This pressure has a domino effect. As soon as the first organization commits itself to environmental issues, others in the industry will follow this example as a result of benchmarking. On the other hand, a company can increase its market share by distinguishing itself from the rest of the companies in terms of environmental issues (Delmas & Burbano, 2011). Organizations want to minimize the negative aspects of their business and fulfill the expectations of stakeholders and society (De Jong, Harkink, & Barth, 2018). By engaging in corporate social responsibilities, organizations gain benefits such as a better reputation and increased shareholder loyalty (De Jong et al., 2018).

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Greenwashing can be seen as the gap between the poor environmental performance of an organization and the positive communication about its environmental performance (Delmas & Burbano, 2011). Greenwashing occurs when an organization deliberately misleads its stakeholders in the field of environmental practices or products of the organization (Berrone et al., 2017; Delmas & Burbano, 2011). One of the most common forms of greenwashing occurs when issuing environmental policy statements. With CSR reports they try to deflect the attention of their unethical conduct through a selective disclosure of positive information (Vollero, Palazzo, Siano, & Elving, 2016). The report about the environmental policy statements rarely contains details about the implementation. The statements made in the report can paint a positive image for the public without the details of the implementation (Marquis & Toffel, 2012). If organizations want to hide behind a better representation of environmental performance, they will misrepresent their stances or bend the truth. For example, a company is more likely to display the outcomes of a project than to lie about the existence of a project (Vos, 2014). By making information appear more positively, the company can work on its reputation and influence customers (Lyon & Maxwell, 2011). The downside of greenwashing is the fact that organizations lose credibility and transparency. As a result, organizations are not able to benefit full from their activities. Furthermore, the market value of the organization will be negative affected (Hawn & Ioannou, 2016).

CEO power

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relationships, the CEOs have a greater ability to respond to contingencies that occur in the task environment of the organization. Furthermore, CEOs has more expert power when they have more expertise (Yetton & Bottger, 1982). The third form of CEO power is prestige power, also called status power, which can be obtained by having powerful friends or by the CEOs reputation. With their reputations, CEOs are able to influence the institutional environment. Finally, ownership power means that the CEO also is a shareholder of the organization. By also being a shareholder, the power and thus the influence over the board of directors is substantial.

CEOs play a central role in actuating corporate responsibility since they influence how environmental issues should be addressed (Lewis et al., 2014; Sharma, 2000). The costs and benefits of disclosure are difficult to determine, which means that the CEO is likely to rely on his own knowledge and interpretation when choosing a disclosure strategy (Lewis et al., 2014). Taken this information into account, the following hypothesis is proposed:

H1: CEO power has a positive effect on the level of greenwashing.

CSR committee

The board of directors play an important part in the decision-making process of CSR. The main way to address decisions regarding CSR is to create a specialized board committee, the CSR committee (Kassinis & Vafeas, 2002). A CSR committee, also referred to as environmental or public responsibility committee, specially focusses on the environmental performance to help companies reach their CSR goals. The tasks of a CSR committee are to plan, implement and review the sustainability policies and activities. They are therefore indispensable for reducing the environmental risks (Liao, Luo, & Tang, 2015). Directors on the CSR committee bring expertise, experience, and resources about CSR to the organization. Those specialized directors are better able to advise the CEO and monitor the decisions made by the top management (Dixon-Fowler et al., 2017). A company with a CSR committee is expected to be more environmentally responsive (Liao et al., 2015) since decisions regarding the environment go through the CSR committee. This makes the CSR committee responsible for the environmental strategy of an organization (Kassinis & Vafeas, 2002). According to the agency theory, the CSR committee decreases the information asymmetry between the CEO and the stakeholders due to the increased transparency regarding the environmental activities (Connelly & Ireland, 2011).

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forming a CSR committee, a company demonstrates its commitment to tackling social issues (Eberhardt-toth, 2017). Taking this into consideration, the following hypothesis is proposed:

H2: The presence of a CSR committee has a negative effect on the level of greenwashing.

And:

H3: The presence of a CSR committee has a negative moderating effect on the relationship

between CEO power and the level of greenwashing.

Method

Sample

To test the hypotheses, data about the extent of greenwashing, CEO power and CSR committees have been collected from 8,023 international public organizations, during 2002 to 2017. A sample is created by matching data from the ASSET 4 index from Thomson Reuters Eikon, the ESG disclosure score from Bloomberg and company and board information from the BoardEx database. ASSET 4 from Thomson Reuters Eikon acquires information from annual reports from large, publicly traded companies from over 45 countries, at annual frequency. Both annual reports and CSR reports are included (Dyck, Lins, Roth, & Wagner, 2019). Bloomberg database brings real-time data together with powerful analytics and communications tools (Bloomberg Finance L.P., 2018). BoardEx is a database with biographical information about most CEOs and board members in the world since 1999. The CEOs and board members mentioned in the BoardEx database are from both private, public and non-profit organizations (Khanna, Kim, & Lu, 2019). The measurements and sources of the variables are included in table 2. The final sample of this study included 10,013 firm-year observations for 1,600 listed companies operating in 69 industries located in 45 countries during 2006 to 2017. Two-digit SIC codes were used to identify the industries of the organizations. Seventy percent of the organizations from this sample were captured in six industries, namely oil & gas, chemicals, electronics, electric/gas/sanitary services, depository institutions and business services (table 1).

Table 1 Six main industries

SIC-code Industry Number of organizations

13 Oil & gas 136

28 Chemicals 126

36 Electronic 107

49 Electric, Gas & Sanitary Services 71

60 Depository Institutions 68

73 Business services 34

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Dependent variable: Greenwashing

Since greenwashing can be conceptualized as the gap between environmental performance and communication of those environmental performance (Delmas & Burbano, 2011), the method used by Tashman, et al. (2019) is used. According to this method, greenwashing is measured by subtracting the environmental performance score from the environmental reporting score. Environmental performance refers to the intentional actions of an organization towards their stakeholders and the unintended externalities as a result of these intentional actions (Tashman et al., 2019). The environmental performance score is retrieved from Eikon ASSET4. ASSET4 conducted the EEC performance score which consists of the Environmental, Economic and Corporate Governance score. Since the focus of this study is on greenwashing, only the environmental performance score is used. The environmental score is measured based on multiple components (ResearchFinancial, 2018). The ESG disclosure score is retrieved from Bloomberg and also consists of three indices of the company’s level of disclosure: the environmental, social and governance (ESG) performance. Bloomberg develops these indices by aggregating public data and items from the news of listed organizations worldwide. The environmental reporting score is measured by the ESG disclosure score, retrieved from Bloomberg. The ESG disclosure score measures transparency. From the ESG disclosure score, the environmental score is used, where the higher the environmental score, then more environmental information is disclosed (Bloomberg, 2014). Both the performance and disclosure score exists of a range from 0 to 100. Higher scores on the variable greenwashing indicate a larger gap between environmental performance and environmental disclosure, and thus a higher degree of greenwashing (Tashman et al., 2019).

Independent variable: CEO power

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Ridge, & Hill, 2016). Company tenure will be measured by calculating the number of working years by subtracting the year in which the CEO started working at the company from the last year of the data selection (2017). When the Company tenure is above the sample median, the variable Company tenure is one. According to Ryan and Wiggins (2004) the influence of a CEO over the board increases with CEO tenure. Therefore, the CEO creates more power. CEO tenure is measured as the number of years he or she have been the CEO of the company (Walls & Berrone, 2017). The variable CEO Tenure equals one if the CEO tenure is above the sample median.

Moderating effect: the presents of a CSR committee

A company with a CSR committee shows a higher tendency to be transparent regarding environmental sustainability (Liao et al., 2015; Walls & Berrone, 2017). The presence of an CSR committee is measured by BoardEx data. When the committee name contains "health", "sustainability", "environment", "social", "responsibility", "community", "safety", "charities", "ethics", "responsible" or "human resources" , the committee was marked as CSR committee. A dummy variable was created, which equals 1 with the presence of a CSR committee within an organization and otherwise it equals 0.

Control variables

As mentioned previously, the power of a CEO might have a relation with the level of greenwashing and the presence of an environmental committee might affect this relationship. However, there are other variables that may affect the level of greenwashing. Consistent with prior research, organization-, financial-, and CEO level control variables that may affect the relationship, have been included.

First, organization size is added because large organizations face greater public pressure (Tashman et al., 2019) which might have an impact on their level of greenwashing (Vos, 2014). The organization size is measured using the logarithm of total assets (Walls, Berrone, & Phan, 2012). Second, in line with the pressure argument, the control variable organization age is added, since old organizations might face other pressures than newer organizations (Chatterjee & Hambrick, 2011). Third, the control variable state owned is added since this variable might affect the tendency to engage in greenwashing (Tashman et al., 2019). If 50% or more of the strategic share holdings are held by the government, the organization can be said state owned and is marked 1. If the percentage is lower than 50%, the organization is marked a zero since it is not state owned. Last, boardsize, since there is an increase in agency conflicts when the number of board members related to the CEO rise (Hope, Langli, & Thomas, 2012).

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organization (Tashman et al., 2019). Moreover, larger firms with less debt are able to invest in activities that are not profitable (Hussain, Rigoni, & Cavezzali, 2018). Second, Capital intensity, measured as ratio of capital expenditures over sales. Third, advertising intensity, measured as ratio of advertising expenditure to sales (Walls & Berrone, 2017).

Lastly, two CEO level control variables were added to the test. The CEO’s age might have an influence on how important CSR is for a CEO (Petrenko et al., 2016). CEO age is measured in number of years (Walls & Berrone, 2017). Furthermore, CEO qualifications are added because more qualifications imply that the CEO has more experiences which can have influence on the power of a CEO. CEO qualifications is measured as the number of qualifications of a CEO (Walls & Berrone, 2017).

Table 2 Measurement of dependent, independent, and control variables

Variable Measurement Value Source

Greenwashing Environmental reporting minus

environmental performance

Continuous Bloomberg Professional Services and ASSET4 Thomson Reuters Eikon

CEO power Indicator of whether the organization has an

environmental committee

Continuous BoardEx and ASSET4 Thomson Reuters Eikon

CSR committee Indicator of whether the organization has an

environmental committee

0 or 1 BoardEx

Organization age The number of years between the current year

and the date that the organization founded

Continuous ASSET4 Thomson Reuters Eikon

Organization size Log of total assets Continuous ASSET4 Thomson Reuters

Eikon

State ownership Indictor of whether the organization is state

owned (>50% of the shares are of the government)

0 or 1 ASSET4 Thomson Reuters

Eikon

Leverage Log of the ratio of total debt to total assets Continuous ASSET4 Thomson Reuters

Eikon

Capital intensity Log of the ratio of capital expenditures over

sales

Continuous ASSET4 Thomson Reuters Eikon

Advertising intensity Log of the ratio of advertising expenditure to sales

Continuous ASSET4 Thomson Reuters Eikon

Board size The total number of members on the board Continuous BoardEx

CEO qualifications The number of qualifications of a CEO Continuous BoardEx

CEO age The number of years between the current year

and the date of birth of the CEO

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Analysis

The Hausman test was performed to determine whether the random or fixed effect model could be used for this analysis (Hausman, 1978). Since the p-value of the Hausman test (p = 0.000) is lower than 0.05, a random effect regression cannot be performed. Therefore, the fixed effect regression analysis is used to measure whether CEO power has an influence on greenwashing, and what the effect of a CSR committee is on this relationship. Furthermore, to avoid non-normality issues, histograms including the normally distribution curve were used to determine whether the variable is normal distributed. The control variables organization size, leverage, capital intensity, and advertising intensity were not normally distributed. Therefore, these control variables were transformed by taking the logarithm of the variable. Furthermore, the bivariate correlations and the variance inflation factor are evaluated to avoid multicollinearity problems.

Results

Descriptive statistics

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Table 3 Descriptive statistics

Variable Mean SD Min Max

1. Greenwashing -38.08 22.81 -95.49 56.41 2. CEO power 1.70 0.96 0.00 3.00 3. CSR committee 0.18 0.38 0.00 1.00 4. Organizational age 62.01 48.42 0.00 307 5. Organization sizea 7.17 1.11 4.67 11.47 6. State ownership 0.01 0.09 0.00 1.00 7. Leverage 0.25 0.19 0.01 3.78 8. Capital intensity 0.14 0.93 -0.02 58.58 9. Advertising intensity 1.20 48.00 -11.85 3,727.17 10. Board size 10.61 3.47 2.00 35.00 11. CEO qualifications 1.86 1.12 0.00 9.00 12. CEO age 56.50 7.56 29.00 92.00

N = 10,013 observations for 1600 organizations. a size measured as assets in billions of dollars

Correlations

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Regression results

The results of the fixed effect regression analysis are presented in table 5. The control variables are tested in model 1. Model 2 contains the results of the test of hypothesis 1, which predicted a relation between CEO power and the level of greenwashing of an organization. The model shows that the coefficient on CEO power is positive but insignificant (β = 0.190, p = 0.424), meaning that the hypothesis is not supported. Hypothesis 2 is tested in model 3. According to the hypothesis, a CSR committee has a negative effect on greenwashing. The finding shows that CSR committee is negative and significant (β = -3.903, p = 0.000) related to greenwashing and, therefore, the second hypothesis is supported. Model 4 represents the result for hypothesis 3, which predicts the negative moderator effect of the presence of a CSR committee on the relationship between CEO power and greenwashing. The interaction term (CEO power*CSR committee) is negative and significant (β = -1.539, p = 0.003). This finding indicates that the presences of a CSR committee does have a negative effect on the relationship between CEO power and greenwashing. Therefore, the third hypothesis is supported. According to models 2, 3 and 4, there is a positive but insignificant result of CEO power. However, the models show that CEO power reduces the effects of a CSR committee. CEO power in model 3 has a greater effect (β = -3.903) than the combined variable of CEO power and the CSR committee (moderator, model 4) (β = -1.539).

Additional analysis

Triple bottom line

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Regression results

Model 5, 6 and 7 in table 5 show the results of the additional analysis for CSR decoupling. The relationship between CSR decoupling and CEO power is tested in model 5. This model shows that CEO power has an insignificant and positive effect (β = 0.153, p = 0.511) on CSR decoupling. Model 6 shows that the presence of a CSR committee has an significant and negative effect on CSR decoupling. So far, both model 5 and 6 are in line with the findings regarding greenwashing. However, model 7 shows that the effect of CSR committee on the relationship between CSR decoupling and CEO power is an insignificant and positive relation (β = 0.224, p = 0.660). Furthermore, model 7 also shows that CEO power reduces the effects of a CSR committee (β = 2.898 and β = 0.224). Findings regarding the social decoupling are presented in model 8, 9 and 10 in table 5. Model 8 shows that CEO power has an insignificant and positive effect (β = 0.355, p = 0.177) on social decoupling which is in line with the findings of CSR decoupling and greenwashing. However, the effect of a CSR committee on the relationship between social decoupling and CEO power (model 10) is negative and insignificant (β = -0.101, p = 0.860).

Discussion

This study examined the effect of CEO power on the level of greenwashing. The moderating effect of a CSR committee on greenwashing and on the relationship between CEO power and greenwashing is also examined during this study. The hypotheses were tested based on an international database existing of organizational information, components of CEO power, ESG disclosure scores and EEC performance indicators. Building on agency theory, it was expected that the information asymmetry between the CEO and the stakeholders will increase due to CEO power. Therefore, it was expected that CEO power would have a positive effect on greenwashing. Against this expectation, there was a positive but insignificant relation between CEO power and greenwashing (H1). The unexpected finding can be explained by various factors. First, there is an explanation based on theoretical perspective. CSR can bring private benefits for CEOs which indicates that CEOs are willing to engage in CSR. Jiraporn & Chintrakarn (2013) found that powerful CEOs are more willing to engage in CSR. When the CEO wants to engage in CSR, it is less likely that the organization will engage in greenwashing. Secondly, the measurement of CEO power might not appropriate for this study. CEO power is measured based on 4 variables but no CEO has ultimate power (4) which reduces the level of CEO power.

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are also responsible for a transparent and truthfully report about the CSR activities of an organization (Velte, 2017). Therefore, the expectation was that the presence of a CSR committee has a negative influence on greenwashing (H2). The results from the second model confirm this expectation. The results of the second model show a negative and significant outcome. Therefore, it can be concluded that CSR committees ensure a more reliable and more disclosed report on CSR performances and actions of an organization.

According to the literature and to the agency theory, CSR committees are corporate governance mechanisms which can be used to monitor the CEO. The influence and, therefore, the power of CEOs can be limited because of the monitoring function of a CSR committee. As a result, CEOs are less likely to engage in self-serving behavior. The third hypothesis states that the influence of a CSR committee has a negative effect on the relationship between CEO power and greenwashing. As expected, the results show that there is a negative and significant relation. Surprisingly, CEO power was found to reduce the positive effect of the CSR committee on greenwashing. An organization with a CSR committee and a powerful CEO is more likely to engage in greenwashing than organizations with a CSR committee and a less powerful CEO. These findings show that CEO’s play an important role in the environmental activities of an organization. The decisions concerning the environmental activities can be influenced by the CEO. Despite the pressure from the CSR committee and other stakeholders, it is the CEO who makes the final decision. The more power a CEO has, the more influence the CEO has on these decisions (Walls & Berrone, 2017).

The additional analysis tested whether CEO power has an effect on CSR decoupling and the social dimension. The results of this analysis show similar findings as the environmental dimension; the presence of a CSR committee reduces greenwashing. However, the findings of the additional analysis show that the presence of a CSR committee does not have a significant effect on both CSR decoupling and social decoupling. This may have something to do with the measurement of CEO power, which is also the case when testing the first hypothesis.

Conclusion

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This research attempts to make several contributions. First, as organizational factor, CEO power is under-explored. Unfortunately, this study cannot provide evidence that CEO power has an effect on greenwashing. Secondly, this study investigated the relationship between CEO and greenwashing. Little research has been done into greenwashing, let alone in relation to CEO power. By adding the moderating effect of the CSR committee, this study also contributes to the corporate governance literature. The results of this study provide evidence that the level of greenwashing is positively influenced by the presence CSR committees. However, the presence of CEO power reduces the effects of the CSR committee. Therefore, it can be said that high CEO power is undesirable for organizations.

Although this study has some contributions, this study also has several limitations which are opportunities for future research. First, the calculation of the variable CEO power was based on the four dimensions of CEO power according to Finkelstein (1992): prestige, expert, ownership and structural power. However, other dimensions of power might also be relevant. An investigation into how different dimensions of power, in addition to those used during this, can have an effect on greenwashing is a possibility for further investigation. In addition, there was no convincing power in the dataset of this study which means that there was no CEO with all four of the components of the measurement of CEO power. There was only one CEO in the dataset who had all the components of CEO power, but there was no greenwashing data available from that organization. Secondly, the EEC score of ASSET4 is based on many different components. Thomson Reuters stopped collecting data for these components from 2014. After that, Thomson Reuters started calculating environmental performance in a different way (Thomson Reuters, 2013).

Besides the limitations and the related future research, there is another aspect that can be rectified in future research. There are nearly 200 CEOs within the Round Table in the United States that issued a statement saying that their businesses will invest in their employees, protect the environment and exclusively do business with sustainable suppliers rather than focus only on shareholder value (David Gelles & Yaffe-Bellany, 2019). The question is whether this is possible. As mentioned in the introduction, it is hard for a CEO to change the perspectives of an organization by itself. It needs their stakeholders, the society and other partners. Therefore, future research should have a look at the effects of stakeholder pressure in relation to greenwashing.

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