Business sustainability calls for responsibility in the context of the environmental, social, and governance (ESG) agenda. According to the upper echelons’ theory, a firm’s activities and business outcomes are charted by top management. However, how the Chief Executive Officer (CEO) balances the firm’s profit maximisation objectives while serving the ESG agenda remains unexplored. Therefore, this study takes a holistic approach to examine how CEO power affects the business sustainability of a firm through managerial risk-taking. We augment the upper echelons theory of Hambrick and Mason (1984) by incorporating the CEO power framework of Finkelstein (1992) with the managerial risk-taking framework of Hoskisson et al. (2017). We find that CEO power is associated with greater managerial risk-taking and poorer business sustainability. The ownership power, expert power and prestige power of the CEO are important in explaining the managerial risk-taking and firm sustainability. Specifically, financial leverage and research and development (R&D) expenses partially mediate CEO power in explaining a firm’s ESG performance.
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Lee et al. (2024) studied this question.
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