Employee Responses to CEO Activism

66 Pages Posted: 20 Jul 2023 Last revised: 3 May 2024

See all articles by Anahit Mkrtchyan

Anahit Mkrtchyan

University of Massachusetts Amherst - Isenberg School of Management

Jason Sandvik

Eller College of Management, University of Arizona

Da Xu

Tsinghua University, School of Economics and Management

Date Written: May 3, 2024

Abstract

We examine employee responses to CEO activism, the increasingly common practice of CEOs taking public stances on socio-political issues. CEO activism may bolster employees’ identification with their organizations and strengthen shared beliefs among employees. Alternatively, CEO activism may alienate employees if CEO stances contrast with employees’ ideologies. We find that employee satisfaction is higher when CEOs engage in activism that is aligned with employees’ ideologies. Furthermore, firms with CEO activism experience a net inflow of productive, ideologically-aligned inventors, which contributes to increased firm-level innovation. The improvements in employee satisfaction and innovation constitute an important channel that connects aligned CEO activism to increased firm value.

Keywords: CEO activism, employee satisfaction, innovation, human capital, corporate culture, diversity washing.

JEL Classification: G34

Suggested Citation

Mkrtchyan, Anahit and Sandvik, Jason and Xu, Da, Employee Responses to CEO Activism (May 3, 2024). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=4506862 or http://dx.doi.org/10.2139/ssrn.4506862

Anahit Mkrtchyan (Contact Author)

University of Massachusetts Amherst - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States

Jason Sandvik

Eller College of Management, University of Arizona ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Da Xu

Tsinghua University, School of Economics and Management ( email )

Haidian District, Beijing, China
Beijing, Beijing 100084
China

HOME PAGE: http://www.da-xu.com/

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