Trade-off among stakeholders: CEO political orientation and corporate social irresponsibility

We draw on the Upper Echelons theory to investigate the effect of CEO liberalism—as reflected by core beliefs on the liberal-conservative spectrum—on firm engagement in corporate social irresponsibility (CSI). We argue that CEO liberalism is related to an asymmetric treatment of shareholders and other non-shareholding stakeholders. Specifically, we distinguish CSI behavior toward shareholders from CSI behavior toward non-shareholding stakeholders and predict that while CEO liberalism reduces CSI behavior toward non-shareholding stakeholders, it also increases CSI behavior toward shareholders. We further identify governance contingency factors, such as institutional ownership, board composition, and compensation mechanisms, that moderate the predicted main relationships. We test our predictions with a sample of S&P 500 firms between 2000 and 2009 and find support for most of our hypotheses.