We theoretically discuss and empirically show how CEO power based on environmental expertise and formal influence over executives and directors, in the absence and presence of shareholder activism, spurs firms toward greener strategies. Our results support the idea that CEOs with informal power, grounded in expertise, reduce corporate environmental impact and this relationship is amplified when the CEO also enjoys formal power over the board of directors. Additionally, we found that any source of CEO power, whether informal or formal, is a good catalyst for transforming shareholder activism into corporate greening. However, in the absence of such activism, only CEOs’ informal environmental expert power acts as a determinant of firm environmental performance.

Judith Walls, P. Berrone

2017