Corporate Climate Policy and CEO Age: Age Matters

Speaker: Akihiro Omura
Affiliation: Griffith University

Abstract

Addressing climate change will take decades to resolve and, in this manner, it is a generational problem where the resolution will not only rely on governmental frameworks and company strategies, but also leaders of now and leaders yet to emerge. In this context, climate change is a risk now and into the future. However, generally as individuals age their risk aversion increases, and also due to the ultimate certainty of death they are less likely to see that much of the future. Consequently, we hypothesized that as the age of a CEO increases, the less likely their company is to engage in greenhouse gas reduction activities. Our global sample indicates that companies that have greenhouse gas emissions targets and more generally positive environmental policies are negatively correlated with the CEO’s age. Thus, age matters and the older the CEO, the less likely the company is to have greenhouse gas reduction policies. This result may be because of risk aversion, if climate change is considered a risk, or because more than half of the CEOs in our sample are not likely to be alive in 2050. Hence, they are making short-term decisions and failing to consider generational challenges. Consequently, although our analysis shows that this negative relationship can be moderated by the presence of influential younger executives. Our work points to a challenge, age matters and thus enrolling companies into generational challenges may require a reconsideration of governance structures.