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Why older managers can make more sustainable decisions than their younger counterparts?

Management studies have usually argued that CEOs closer to retirement are less likely to make major strategic investments because they are unlikely to reap the financial rewards of their investments. However, these studies have not considered the influence of one’s career horizon on decisions that have long‐term societal implications, such as decisions related to environmental performance. In such situations, CEOs with shorter career horizons (i.e., older managers) are more likely to make risky investments for at least two reasons.

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First, the process of aging, although biological, also carries important social meanings, culturally imbued expectations for behavior, and socially defined needs and priorities. Although people with shorter career horizons will still apply a rational economic view to firm‐specific decisions, people who take a longer temporal view are more likely to include a wider set of factors in their decision‐making. Given this wider set of considerations, older managers are more likely to acknowledge a wider set of relevant opportunities and threats, such as those pertaining to society or the natural environment.

Second, as executives age, they prioritize their emotional needs. This shift is clearly seen with age, yet it has also been shown to exist in other contexts in which time horizons shrink, such as during periods of illness and war. The older executives care more about their personal legacy, which increases their willingness to use the available opportunities to have a positive impact.

Natalia Ortiz, Tima Bansal, and I have tested our ideas using 150 observations from the US electric power generation sector over a three‐year unbalanced sample. Our results show that CEO decisions to invest in renewable energy were fostered by shorter career horizons. Additionally, we have found that longer tenures, higher levels of organizational ownership, and lesser degrees of short‐term compensation were also positively associated with sustainable investments in our sample.

If you are interested, you can read more details in:

Ortiz‐de‐Mandojana, N., Bansal, P., & Aragón‐Correa, J. A. (2018). Older and Wiser: How CEOs’ Time Perspective Influences Long‐Term Investments in Environmentally Responsible Technologies. British Journal of Management, in press.

Download the paper

More about my research:

https://aragoncorrea.wordpress.com/research-alberto/

 

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