Discretionary powers in CSR, ESG and sustainability – a critical analysis of executives’ influences in shaping corporate CSR profiles

Corporate social responsibility (CSR) has evolved into a widespread business practice in recent decades and continues to grow in importance due to pressing environmental and social challenges and related stakeholder demands. In practice, however, the extent of actual CSR engagement and reporting varies considerably between companies – even between those with similar characteristics. These differences mainly arise due to the voluntary nature of the construct and the largely unregulated environment of CSR reporting, which leaves a wide margin of discretion to companies’ executives who are responsible for strategic decision-making and setting the direction of the firm. Given that it is particularly executives’ personal characteristics and motivations, stakeholder expectations and governance mechanisms that influence their decision-making, this dissertation comprises four research papers that each focus on different aspects of these influences to explore how executives use the discretionary powers associated with CSR to shape their firms’ CSR profiles.
In particular, the first paper provides a systematic literature review on the current state of research regarding the impact of CEO-related determinants on firms’ CSR performance. The second paper builds on the findings and examines the impact of CEOs’ reputational ambitions – a previously underexplored driver – as a moderator of the firm size – CSR link. The third paper investigates managements’ discretion exercise in terms of CSR reporting, by analysing the transparency and reporting practices of CSR controversies. Finally, the fourth paper analyses the effectiveness of CSR-linked executive compensation – a governance mechanism widely used to align executives’ CSR decision-making with stakeholder expectations – by exploring its impact on CSR-washing activities.
In summary, the results indicate that executives largely exercise their discretion in ways that prioritise corporate image and personal reputation over genuine CSR commitment and transparency, revealing significant shortcomings in the efficacy of current CSR practices and providing important implications for more thorough and precise governance, regulation and accountability mechanisms.