CHIEF SUSTAINABILITY OFFICER ANNOUNCEMENTS: IMPLICATIONS ON SHAREHOLDER VALUE

Abstract

This study examines whether shareholders react negatively to announcements of Chief Sustainability Officer (CSO). Our research is motivated by the increasing popularity of CSO position among corporations, often announced by firms as testament to a long-term strategic focus on sustainability. Specifically, we conduct event study around corporate CSO announcements from 2000 to 2013, covering the entire period for the existence of newly-emerged CSO titles. Adopting a paradoxical approach to sustainability issues, the study focuses on underlying tensions in sustainability issues, resulting from the multitude of stakeholders with conflicting interests. First, we argue that shareholders react negatively to CSO announcements. Second, we posit that the severity of shareholders’ negative reaction differs across firms. Specifically, the magnitude of impact depends on firm-specific sustainability factors associated with past sustainability practices, management system quality and perceived managerial capability in dealing with sustainability paradoxes. These arguments are supported by empirical analysis. Finally, our study’s numerous contributions to existing literature on corporate sustainability are highlighted and new practical insights to sustainability management discussed.