CEOs' Prosocial Behavior, Their Careers and Corporate Policies

Abstract

This paper examines the association of CEOs' prosocial behavior with their career paths and corporate policies. Using individuals' involvement with charitable organizations as a proxy for prosocial behavior, we find that prosocial individuals are promoted to Chief Executive Officers (CEOs) faster than non-prosocial individuals. In addition, firms with prosocial CEOs tend to have lower executive subordinate turnovers, implement more employee-friendly policies, experience higher customer satisfaction, and engage in more socially responsible activities. We also find that firms with prosocial CEOs have higher firm value. These results are corroborated when we compare changes in corporate policies and firm value around different types of CEO turnovers: a prosocial CEO replacing a non-prosocial CEO vs. other types of CEO turnovers. In sum, our results suggest that prosocial CEOs are more likely to make corporate decisions that benefit a wide range of firm stakeholders.