CEO Materialism and Corporate Social Responsibility

CEO’s ownership of luxury goods, including expensive cars, boats, and real estate, is interpreted as an indication of relatively high “materialism.” The psychology literature defines materialism as a way of life where an individual displays an attachment to worldly possessions and material needs and desires (Richins and Rudmin 1994). This literature documents experimental findings on how materialism is related to an individual’s behaviors towards other people and society, and motivates intriguing theories regarding an executive’s commitment to CSR. We first examine the extent to which CEOs versus firms influence CSR decisions. When estimating models with both firm and CEO fixed effects we find that CEO fixed effects explain 52%-74% of the variation in their firms’ CSR scores across all social dimensions (Community, Diversity, Employee Relations, Environment and Product Safety). In contrast, firm fixed effects explain 11%-32% of the variance in CSR scores. These results imply that the CEO effect on the variation in CSR scores is likely to be first-order.