Implications of Overwhelmed Leadership: How Executive Job Demands Hinder Corporate Sustainability Performance

Abstract

As implied by executive job demands theory, intensified job demands of a firm’s top executives limit their cognitive capacity and centralize the locus of decision-making, which may undermine corporate sustainability performance. The current study tests this effect, along with the impact of two contextual factors, to reveal that the negative influence of executive job demands is weaker if firms feature greater functional diversity and average tenure in their top management teams. In an extension of upper echelon theory, this study also outlines the influence of task challenges that confront strategic leaders on corporate sustainability performance.

Keywords

corporate sustainability executive job demands TMT functional diversity TMT tenure top management team upper echelon theory

Substantial research has examined the impact of demographic, psychographic, and experiential characteristics of the top management team (TMT) in driving corporate sustainability performance; we posit that the job context could have similarly significant impacts. Strategic leadership literature acknowledges how organizational and environmental contexts define job demands on executives and influence their actions (Finkelstein et al., 1996; Hambrick et al., 2005), although a common assumption holds that all top executives face similar task challenges. However, job demands span organizational (internal) challenges, such as those related to product-market breadth, subsidiaries, internationalization, and performance shortfalls as well as environmental (external) challenges, such as industry dynamism and complexity (Hambrick, 2007; Hambrick et al., 2005) Accordingly, we posit that the challenges each TMT confront actually vary across firms and that greater executive job demands limit the cognitive capacities and information processing of boundedly rational managers (Cyert & March, 1963).

Because corporate sustainability requires TMT agency, varying job demands may determine the extent to which executives commit to achieving corporate sustainability (Hambrick et al., 2005), defined as the organization’s attempts to balance social, economic, and environmental objectives (Hahn et al., 2015; Van Marrewijk & Werre, 2003). The concept of executive job demands, which has its origins in industrial and organizational psychology research on work-related stress and individual task behaviors (Demerouti et al., 2001; Karasek, 1979), addresses the challenges that TMT faces explicitly. For example, demographic (Bertrand et al., 2021; Manner, 2010; Tacheva et al., 2020) and psychological (Graafland et al., 2007) attributes of TMT members likely are critical because these attributes largely define the executives’ functional and cognitive capacities. However, if executive job demands are extreme, even capable TMT members might have minimal attention to devote to developing specific resources and capabilities for corporate sustainability (Annunziata et al., 2018; Darnall & Edwards, 2006). By overwhelming their information processing limits (Siggelkow & Rivkin, 2005), job demands constrain the TMT’s absorptive capacity, limiting its ability to find creative solutions for sustainability. Moreover, as job demands grow, managers tend to adopt more centralized decision-making and formalized routines and processes (Heavey & Simsek, 2013; Khandwalla, 1972). Such tendencies can stifle middle- and lower-level managers’ ownership and commitment, with detrimental effects on their co-development of corporate sustainability solutions.

This detrimental link might also depend on situational factors as implied by upper echelon theory (Hambrick & Mason, 1984). First, functionally diverse TMT members (Hambrick et al., 1996; Hoffman & Maier, 1961) have distinct cognitive resources and nonredundant information conduits, which can mitigate the challenges of executive job demands (Bantel & Jackson, 1989). Second, a longer average TMT tenure should allow executives to develop firm- and job-specific skills (Hambrick & Mason, 1984; Kor, 2003), more experience with the internal and external task environment, and intensified intra-team social cohesion (Chen, 2011), all of which can lessen the effects of job demands and weaken their negative impacts on corporate sustainability performance.

In testing these predictions, we make several contributions to corporate sustainability research. With a theoretically novel perspective, we establish executive job demands as a relevant antecedent of corporate sustainability performance (Hambrick et al., 2005) and respond to recent calls in the literature to examine firm’s allocation of attention to corporate sustainability (Aguilera et al., 2021). Although the applicability of upper echelon theory to organizational sustainability has been established in previous research, we find little theoretical or empirical research that clarifies how the demands of TMTs’ job contexts might affect the firm’s sustainability. The use of executive job demands in management research is rare (see Zhu et al., 2022), so our research provides early evidence for the validity of this essential extension of upper echelon theory (Hambrick & Mason, 1984). In addition, we highlight boundary conditions that circumscribe the negative impact of executive job demands on corporate sustainability performance. That is, greater functional diversity and tenure in the TMT help shield a firm from the adverse effects of job demands on corporate sustainability. These assertions have significant implications for the design of TMTs, as firms across the globe continue to grapple with the pressures of managing sustainability while working in increasingly complex job contexts.

Theory and Hypotheses

Upper Echelons: Antecedents of Corporate Sustainability

Organizational theories prioritize strategic leadership and conceive of it in various ways such that the behavioral theory of the firm cites the power of a dominant coalition (Cyert & March, 1963), whereas strategic choice arguments emphasize leaders’ roles as primary decision-makers (Child, 1972), as depicted in Chester Barnard’s (1938) popular book The Functions of the Executive. Upper echelon theory also anticipates the importance of top executives (Hambrick & Mason, 1984), defined as the small group of people who hold apex positions in a firm and exert significant influence over various strategic outcomes (Carpenter et al., 2004; Finkelstein & Hambrick, 1990; Smith et al., 1994). The TMT engages in strategic leadership, and studies have empirically examined the impact of the demographic and psychological attributes of its members on various performance metrics.

For example, Oh et al. (2016) find that firms run by older CEOs engage in less corporate sustainability because these CEOs have shorter career horizons and avoid long-term–oriented strategies. Among a sample of 650 U.S. firms, Manner (2010) finds that CEO gender, education, and functional experience influence corporate sustainability; Bertrand et al. (2021) find that firms with foreign CEOs, because they face the liability of foreignness, seek to gain legitimacy by engaging in greater corporate sustainability. Beyond just the CEO, Tacheva et al. (2020) note that greater TMT size, which implies more functional and cognitive resources, increases corporate sustainability. Greater TMT functional diversity is associated with greater cognitive bandwidth and competencies to process information, so it encourages sustainability efforts (Henry et al., 2019). However, older TMT members offer diminished cognitive ability and are reluctant to take a risk, negatively affecting corporate sustainability (Tacheva et al., 2020), whereas executives with sustainability backgrounds can benefit from firm performance (Wiengarten et al., 2017). In a recent study, Kiefner et al. (2022) discover that TMTs with a higher proportion of female members support the United Nations’ Sustainable Development Goals.

The cognitive orientation of managers (Hahn et al., 2014), such as a CEO’s liberal worldview, may also influence corporate sustainability activities (Mazutis, 2013). Top managers’ awareness of climate change (Todaro et al., 2021), personality (Venugopal et al., 2021), reflective capacity (Jia et al., 2021), and cognitive complexity (Gröschl et al., 2019) of CEOs influence proactive attitudes and approaches to sustainability. Arena et al. (2018) find that CEO hubris enhances sustainability because excessive beliefs in their own capabilities propel these CEOs to risk actions with higher outcome variance. Benevolent and achievement-oriented managers in small firms also exhibit sustainability propensities. According to Graafland et al. (2007), executives with a monotheistic orientation (i.e., belief in the existence of one God) pursue more socially responsible businesses. We seek to extend such insights by detailing how organizational and environmental contexts might affect TMT decision-making in relation to corporate sustainability.

Extensions of Upper Echelon Theory: Executive Job Demands

Job demands represent significant features of any worker’s job environment (Demerouti et al., 2001; Janssen, 2001; Karasek, 1979; Parker et al., 2017; Schaufeli & Bakker, 2004); they refer to elements that require constant physical or mental effort and affect individual performance as well as work-related stress, job satisfaction, and absenteeism (Parker et al., 2017). To account for this crucial construct in organizational research, Hambrick et al. (2005) extend the well-established construct (Bakker et al., 2005; Karasek, 1979) to advance the notion of executive job demands, which by definition include task challenges at both organizational (internal) and environmental (external) levels. Some executives encounter benign environments, but others face complex settings in which their bounded rationality makes it hard to account for a sufficiently wide range of factors (Cyert & March, 1963), with implications for their strategic choices.

For example, environmental (external) challenges might encompass complexity, which refers to the degree of heterogeneity in the industry environment (Child, 1972; Duncan, 1972). Relative to a homogeneous environment, a complex task environment requires executives to conduct regular scans, analyze vast quantities of data, and adapt to fluctuations (Bourgeois, 1980; Sirmon et al., 2007). Another environmental (external) challenge stems from dynamism in the task environment (Dess & Beard, 1984), which reflects the rate and unpredictability of environmental attributes and can have serious consequences for organizational performance and survival (Stuart & Podolny, 1996). In a dynamic environment, TMT cannot establish reliable information and accurately evaluate current and future environmental states to make informed decisions. (Nadkarni & Chen, 2014). Environmental dynamism also demands more effort from managers, which taxes their cognitive functioning (Gilbert et al., 1995; Mitchell Robert et al., 2011).

Organizational (internal) challenges arise when the firm pursues a wider product-market domain, which creates more pressure on top executives (Henderson & Fredrickson, 1996; Kumar, 2009). Managing a multimarket, multiproduct organization is complicated due to the need for careful coordination, resource allocations, and conflict management. Adding new subsidiaries also requires top executives to invest time and attention to local competitors and upstream and downstream constituencies (Vermeulen & Barkema, 2002), which may overload their information processing capability per unit of time (Hutzschenreuter & Horstkotte, 2013). A higher degree of internationalization poses more formidable challenges because the TMT must steer the organization through a maze of cultural and institutional differences, manage resource recombination across borders, alter existing routines, and develop new ones to match local norms (Hutzschenreuter et al., 2011; Tan & Mahoney, 2007). Finally, internal organizational challenges result from performance failures; managers feel strong pressure to improve when they cannot meet aspirational performance levels, increasing their job demands (Hambrick et al., 2005).

Top executives’ agency strongly informs organizational decisions, including those related to corporate sustainability (Aguinis & Glavas, 2012). If top executives operate in a considerably more or less complex task environment, it should affect how much agency they have to act. Despite acknowledgments in strategic leadership literature that decision-making reflects broader environmental contexts (Finkelstein et al., 1996), we know of no discussions of how executive job demands in the task environment affect corporate sustainability.

Impact of Executive Job Demands on Corporate Sustainability

Corporate sustainability requires the development or acquisition of specialized resources and technology capabilities (Annunziata et al., 2018; Darnall & Edwards, 2006), as well as collaboration with target communities to build communication channels, which can lead to conflicting pressures (Bansal, 2005). Such activities are anchored in the TMT agency because executives must make important resource allocation and deployment decisions to achieve change (Bansal & Roth, 2000; Felin & Foss, 2005; Greenwood & Hinings, 1996). Greater job demands increase managers’ physical and mental stress, fatigue, and sense of being overwhelmed, which may limit the TMT’s ability to deal with paradoxes and contradictions when attempting to deal with the varied, interconnected economic, social, and environmental performance expectations of different stakeholders (Berger et al., 2007). Moreover, corporate sustainability requires decision-making under uncertainty, with ambiguous evidence about the implications for financial performance. Managers who already face more intensive job demands may focus on their urgent demands, leaving only minimal time and attention available to devote to long-term sustainability provisions (March & Simon, 1958; Tripsas & Gavetti, 2000).

Firms also must balance economic outcomes with corporate sustainability goals, which may require innovative products, services, and business models (Benn et al., 2014). But job demands drain people’s inelastic cognitive capacities, affecting their extra-role performance (Bakker et al., 2003), including their creative efforts to generate new possibilities (Guilford, 1967; Isen et al., 1985). Because people, including top executives, are boundedly rational (Cyert & March, 1963; Simon, 1947), increasing job demands may force them to decode only a fraction of the total inputs and deal with cognitive limits on their information processing (Siggelkow & Rivkin, 2005). In such cases, people often exhibit an availability bias and make decisions based on accessible data, existing knowledge patterns, or traditional solutions rather than thinking creatively or finding new sustainability opportunities (Gilovich et al., 2002; Zhu et al., 2022). Corporate sustainability, in particular, demands efforts to learn about the needs of societal stakeholders to discover novel solutions, but greater job demands likely constrain the absorptive capacity required for such discovery processes (Cohen & Levinthal, 1990).

In dynamic situations, firms often move toward centralization, manifested as contracted decision-making rights that are limited to a select few (Heyden et al., 2013; Huang et al., 2015; Khandwalla, 1972; Staw et al., 1981) because the challenging environment leaves the organization with less slack and fewer options, so it relies on formalization and routinization (Cyert & March, 1963). But centralized decision-making tends to stifle divergent thinking and innovation (Heavey & Simsek, 2013; Lubatkin et al., 2006). Wong et al. (2011) even specify that centralized firms exhibit poor corporate sustainability performance because employees feel disassociated with decision-making processes and lack any sense of ownership or motivation to collect information from key stakeholders. Corporate sustainability requires a thorough examination of complicated issues and the co-development of creative solutions in collaboration with various stakeholders (Metcalf & Benn, 2013)—processes that are more likely in benign task environments that allow for more slack, do not evoke mechanistic controls, and offer greater autonomy or ownership to employees.

Therefore, intense executive job demands should constrain the cognitive capacity of TMT, leaving them with minimal energies to devote to sustainability activities (Levinthal & Wu, 2010; Penrose, 1959). In contrast, TMTs with lower job demands may be more comprehensive, adaptable, and decentralized in their organizational decision-making, enabling them to focus on corporate sustainability. Formally, we propose the following:

Hypothesis 1 (H1): The greater the executive job demands, the poorer the environmental and social sustainability performance of firms.

Contextual factors influence the baseline relationships of TMT attributes with corporate sustainability, such as firm slack and environmental dynamism (Arena et al., 2018), firm profitability, and the degree of internationalization (Bertrand et al., 2021). Accordingly, we anticipate that the impact of executive job demands may be bounded by various conditions and moderated by contextual factors, as we theorize in the following sections and summarize in Figure 1.

Contextual Impact: Moderating Role of Functional Diversity of TMT

The functional diversity of the TMT may mitigate the negative impact of executive job demands on corporate sustainability because it implies a broad range of skills, capabilities, and cognitive resources (Hambrick et al., 1996; Hoffman & Maier, 1961), as well as enhanced overall problem-solving capacity. Empirical evidence affirms the positive effect of TMT functional diversity on firm performance and innovation (Buyl et al., 2011; Chaganti & Sambharya, 1987; Talke et al., 2011), and Henry et al. (2019) explicitly argue that TMT functional diversity improves triple bottom line performance, due to its provision of more cognitive resources (Bantel & Jackson, 1989), which increases the firm’s capacity to deal with the contradictions of corporate sustainability. In situations with greater job demands, firms with expanded cognitive capacities, because they feature functionally diverse TMT, may be able to engage in creative processes and create innovation-centric routines, including those for corporate sustainability (Wiengarten et al., 2017; Zhang & Bartol, 2010).

In addition, greater functional diversity should introduce more nonredundant information through the TMT’s distinct networks (Ancona & Caldwell, 1992; Hambrick et al., 1996; Nuscheler et al., 2019). Boundary spanning is a primary function of the TMT, the need for which is exacerbated by greater job demands. Compared with more stable environments, TMT functional diversity is more beneficial as task uncertainty increases (Cannella et al., 2008). Because such functional diversity improves information processing, the firm can better manage complex, dynamic task environments and deal with current and future uncertainty (Farjoun & Levin, 2011; Schneider et al., 2017). With more information, the TMT can detect exogenous challenges earlier, and managers may also experience a greater sense of control (Keck, 1997; White et al., 1980). Therefore, the greater functional diversity of the TMT should offer the necessary wherewithal to counter the adverse effects of internal and external job demands and may help the firm achieve corporate sustainability, even in challenging task environments. Formally,

Hypothesis 2 (H2): The negative relationship between executive job demands and environmental and social sustainability performance is weaker for firms with TMTs that exhibit greater functional diversity.

Contextual Impact: Moderating Role of TMT Tenure

Visible attributes, such as average job tenures as a proxy for expertise and cognitive bases, also likely drive TMT choices (Hambrick & Mason, 1984; Pfeffer, 1983; Tihanyi et al., 2000). A longer average TMT tenure might weaken the mentioned baseline relationship because it allows top executives to gain a deeper understanding of their firm’s operations, learn firm- and job-specific skills and gain more knowledge through learning (Guthrie & Datta, 1997; Kor, 2003). Greater experience with the firm and task environment helps long-tenured TMT members counter the challenges of greater job demands stemming from internal and external complexities. They are more cognizant of their firms’ resources and capabilities (Kor, 2006) and have developed wider social and business networks (Westhead et al., 2001). Such social capital is especially salient in situations characterized by uncertainty and ambiguity (Park & Luo, 2001) because it provides diverse information cues that include advice and counsel regarding how to balance tensions across economic and sustainability initiatives (Ferguson et al., 2019). Corporate sustainability entails risky actions, but a longer tenure in the organization may help TMT members orchestrate their knowledge, organizational-level resources, and capabilities to promote more innovative corporate sustainability initiatives.

Furthermore, longer tenures enhance social cohesion in the team, which gains stability, better interpersonal communication, and fewer risks of conflict (Chen, 2011; Murray, 1989). Through their socialization over time, the TMT builds shared cognitive structures and adopts a common vocabulary, which can reduce the challenges of cognitive pressures due to intense job demands (Carroll & Harrison, 1998; Michel & Hambrick, 1992). Considering performance aspirations, Hambrick and colleagues (2005) also predict that executives with longer tenures face less strain from job demands because they have less need to demonstrate their ability or success. Thus, a long average tenure in the TMT should produce greater efficiency, social cohesion, experience, and information sourced from external networks, all of which can mitigate the threat to cognitive capacities and enable the TMT to find novel corporate sustainability solutions.

Hypothesis 3 (H3): The negative relationship between executive job demands and environmental and social sustainability performance is weaker for firms whose TMT has a longer average tenure.

Context, Data, and Results

Context and Data Sources

To test our hypotheses, we collected the data for the independent variable and control variables from a database, Prowess, provided by the Centre for Monitoring Indian Economy, which has been used extensively (e.g., Popli et al., 2021). To test the impact of executive job demands on corporate sustainability, we need data on the TMT and its various attributes, but data related to the TMT of Indian companies are not directly available from any archival database, so we manually extract this information from the firms’ annual reports.

Variables and Measures

Dependent variable

The dependent variable, corporate sustainability performance, reflects the ES score, which aggregates values of environmental and social (ES)¹ performance scores provided in Thomson Reuter’s Asset4 ESG platform (Drempetic et al., 2020; Lioui & Tarelli, 2022; Shi & Veenstra, 2021). These ratings measure firms’ performance, commitment, and effectiveness across seven themes: environmental resource use, emissions, innovation, and social issues related to the workforce, human rights, community, and product responsibility. We downloaded data from Thomson Reuter’s Asset4 ESG platform from 2006 to 2020 and obtained an initial ESG dataset with 872 observations. After the routine filtering process, where we removed financial² and state-owned firms, we are left with 732 observations. After dropping firms due to the unavailability of TMT data in the annual reports, our final sample consists of an unbalanced panel of 334 firm-year observations.

Independent and moderating variables

Following Hambrick and colleagues (2005), we consider six subdimensions to measure the degree of executive job demands. Industry dynamism and competition intensity reflect external complexities; degree of internationalization, performance shortfall, number of subsidiaries, and product diversification capture internal job demands. Industry dynamism is the rate of change and degree of volatility in the external environment (Dess & Beard, 1984), which increases ambiguity (Bourgeois, 1980) and renders previous learning ineffective, with adverse impacts on firm performance (Anderson & Tushman, 2001). Greater dynamism also challenges firms’ efforts to decode the present and future state of the business environment (Farjoun & Levin, 2011). Because greater competition implies more complexity and increased job demands, linked to greater information processing requirements (Sharfman & Dean, 1991), we measure competition intensity according to the Herfindahl–Hirschman Index. A general agreement suggests that more internationalization poses more challenges to the TMT (Hutzschenreuter et al., 2011; Tan & Mahoney, 2007), so we include the degree of internationalization,³ measured as the ratio of foreign to total sales. Next, performance shortfall is a primary determinant of executive job demands (Hambrick et al., 2005). Nonperforming executives might face risks of sanction or dismissal (Boeker, 1997; Puffer & Weintrop, 1991) and seek to make more strategic changes (Hambrick et al., 1993), augmenting their work pressures. We also account for the number of subsidiaries of each sample firm because more subsidiaries entail increased complexities for TMTs that must manage resource allocations across these entities (Katz & Kahn, 1978). Likewise, we include a measure of product diversification, operationalized as the number of unique product segments of the firm. Greater product diversification produces more organizational task interdependencies, with more demands for information processing and coordination (Tallman & Li, 1996). We created an aggregate index, based on a principal component analysis of the dimensions, to serve as the primary independent variable, executive job demands.

To operationalize the first moderating variable, we used TMT members’ dominant functional expertise, with five possibilities: finance/accounting, marketing/sales, production/operations/supply-chain management, engineering/R&D, or administration (Qian et al., 2013). Then, we calculated Blau’s (1977) index to gauge TMT functional diversity. For TMT tenure, we calculate the average tenure of TMT members at the firm-year level.

Control variables

To account for possible confounding effects, we include a wide range of control variables in our estimation model. First, a set of controls pertains to firms’ attributes—size, and other financial parameters. In line with a structural inertia perspective, a larger firm may experience structural inertia (Hannan & Freeman, 1984), which can impede its adoption of corporate sustainability initiatives; we include firm size as a control. Slack provides a buffering mechanism against task uncertainties and informs sustainability actions (Nwoba et al., 2021), so we control for firm leverage. The firm’s profitability is a well-established antecedent of its corporate sustainability, prompting us to add return on assets as a control measure. We also determine the investments a firm makes in research and development, which help it innovate and improve its capacity to develop products and services that are environmentally and socially friendly, such that we control for the R&D intensity of the focal firm. Noting the unique governance structure adopted in Indian corporate sectors, we address business group affiliation as a dichotomous variable, equal to 1 if the firm is affiliated with a business group and 0 otherwise. Extensive literature attests to the influence of business groups on innovation (Mahmood et al., 2017; Popli & Ladkani, 2020) and sustainability initiatives (Ray & Chaudhuri, 2018). As another dichotomous variable, we account for family firm status based on shareholding patterns such that a firm is a family firm if the shares held by promoters are more than 20% (La Porta et al., 1999). We control for the composition of the board of directors with a governance index, computed with a principal component analysis of four board attributes frequently appearing in prior literature: board size, board independence, board attendance, and board busyness. To control for institutional shareholding, we determine the proportion of shares held by institutional equity investors.

As a second set of controls, we focus on TMT attributes. Upper echelon theory predicts that TMT demographic attributes influence firm-level actions (Finkelstein et al., 2009; Hambrick & Mason, 1984). Therefore, we control for TMT size; the number of executives determines the firm’s managerial bandwidth (Carpenter et al., 2004). Higher compensation might motivate the TMT to target corporate sustainability (Berrone & Gomez-Meija, 2009), so we note the average remuneration paid to the TMT. The presence of female executives might also increase sustainability efforts (Clark et al., 2021), and accordingly, we control for TMT gender diversity using a dichotomous variable, equal to 1 if at least one woman sits on the TMT (Buallay et al., 2022; Zajac & Westphal, 1996). We present all the variable definitions in Table 1.

Table 1.

Variable Definitions.

Variable	Definition
ES score	Composite score of the environmental and social performance pillars from Thomson Reuter’s Asset4 ESG platform
Executive job demands	Principal component analysis of six factors: industry dynamism, competition intensity, performance shortfall, number of subsidiaries, product diversification, and degree of internationalization (defined below).
Industry dynamism	Following Dess and Beard (1984), we use the equation yt = β₀ + β₁_t + ε_t to calculate environmental dynamism at the industry level, where y indicates industry sales, t is the year, and ε_t is the residual. With this equation, we regress the natural log of industry sales over the previous 5 years. Next, we calculated environmental dynamism as the antilog of the standard error.
Competition intensity	Measured as (1−Herfindahl–Hirschman index). The Herfindahl-Hirschman index is the sum of the squares of individual market share (by sales) accounted for by the total number of firms in industry (two-digit NIC codes from India).
Performance shortfall	Current performance minus historical aspirational level (average of past two years of return on assets)
Number of subsidiaries	Natural logarithm of the number of subsidiaries of a firm.
Product diversification	Natural logarithm of the number of unique product segments of a firm.
Degree of Internationalization	Ratio of foreign sales to total sales
TMT functional diversity	Following Qian and colleagues (2013), computed using Blau’s heterogeneity index (Blau, 1977), based on a manager’s dominant functional expertise in five areas: finance/accounting, marketing/sales, production/operations/supply chain management, engineering/R&D, and administration.
TMT tenure	Average tenure of TMT members.
Business group affiliation	Dichotomous variable equal to 1 if the firm is affiliated with a business group and 0 otherwise.
Family firm	Dummy variable coded as 1 if promoter shareholding is greater than 20% (La Porta et al., 1999) and 0 otherwise
Firm leverage	Ratio of total debt to total assets
Firm profitability	Ratio of net profit to the total assets of a firm.
Firm size	Natural logarithm of the total assets of a firm
Governance index	Principal component analysis of governance variables: board size, board independence, board attendance, and board busyness.
Institutional shareholding	Percentage of shares held by institutional investors.
R&D intensity	Ratio of research and development expenses to the total sales of a firm.
TMT gender diversity	Dummy variable, coded as 1 if the TMT includes at least one female member.
TMT size	Natural log of the total number of members in TMT of a firm
TMT remuneration	Natural log of the average remuneration of members in TMT of a firm

ES = environmental and social; NIC = National Industry Classification; TMT = top management team.

Modeling Procedure

We use random effects regressions, controlling for year and industry fixed effects,⁴ to test our hypotheses. The random effects model is better suited as it can control biases present in a cross-sectional study (Arora & Dharwadkar, 2011) and help generalize the findings beyond the sample period (Maddala, 2002). The primary dependent variable, ES score, ranges from 0 to 100. With respect to the dependent variable of ES score, we lagged our covariates by 1 year. Equations 1a to 1c reflect our baseline and first and second moderating hypotheses, respectively, and then Equation 1d represents the overall model:

\begin{array}{l} E S S c o r e_{i, t} = b_{0} + b_{1} (E x e c u t i v e j o b d e m a n d s_{i, t}) \\ + c o n t r o l s_{i, t - 1} + e_{i, t} . \end{array}

(1a)

\begin{matrix} E S S c o r e_{i, t} = b_{0} + b_{1} (E x e c u t i v e j o b d e m a n d s_{i, t}) \\ + b_{2} (T M T f u n c t i o n a l d i v e r s i t y_{i, t}) \\ + b_{3} (E x e c u t i v e j o b d e m a n d s_{i, t} \times T M T f u n c t i o n a l d i v e r s i t y_{i, t}) \\ + c o n t r o l s_{i, t - 1} + e_{i, t} . \end{matrix}

(1b)

\begin{matrix} E S S c o r e_{i, t} = b_{0} + b_{1} (E x e c u t i v e j o b d e m a n d s_{i, t}) \\ + b_{2} (T M T t e n u r e_{i, t}) \\ + b_{3} (E x e c u t i v e j o b d e m a n d s_{i, t} \times T M T t e n u r e_{i, t}) \\ + c o n t r o l s_{i, t - 1} + e_{i, t} . \end{matrix}

(1c)

\begin{array}{l} E S S c o r e_{i, t} = b_{0} + b_{1} (E x e c u t i v e j o b d e m a n d s_{i, t}) \\ + b_{2} (T M T f u n c t i o n a l d i v e r s i t y_{i, t}) \\ + b_{3} (E x e c u t i v e j o b d e m a n d s_{i, t} \times T M T f u n c t i o n a l d i v e r s i t y_{i, t}) \\ + b_{4} (T M T t e n u r e_{i, t}) \\ + b_{5} (E x e c u t i v e j o b d e m a n d s_{i, t} \times T M T t e n u r e_{i, t}) \\ + c o n t r o l s_{i, t - 1} + e_{i, t} . \end{array}

(1d)

Results

We provide the descriptive statistics and correlations in Table 2. Noting several significant correlations, we checked for multicollinearity, but the values of the variance inflation factors never exceeded 5, within acceptable limits, so multicollinearity issues do not appear to be a concern for our empirical analysis (Burns & Bush, 2000).

Table 2.

Descriptive Statistics and Correlations.

		(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)	(14)	(15)
1	ES score	1.00
2	Executive job demands	.10	1.00
3	TMT tenure	–.08	–.15**	1.00
4	TMT functional diversity	–.27**	–.05	.34**	1.00
5	Firm size	.34**	–.23**	.05	–.23**	1.00
6	Firm profitability	.16**	.32**	.02	–.01	–.32**	1.00
7	Firm leverage	–.07	–.20**	–.00	–.08	.54**	–.55**	1.00
8	R&D intensity	–.09	.28**	–.06	–.17**	–.26**	.09	–.24**	1.00
9	Business group affiliation	–.13**	–.25**	.07	–.04	.09	–.24**	.20**	.03	1.00
10	TMT gender diversity	–.18**	.02	.22**	.36**	–.19**	.04	–.16**	–.00	–.14**	1.00
11	TMT size	–.15**	–.04	.22**	.40**	.12**	–.19**	.08	.01	.03	.17**	1.00
12	TMT remuneration	.03	–.33**	.11**	.27**	.07	–.20**	.13**	–.38**	.06	.19**	.07	1.00
13	Family firm	–.17**	.00	–.02	–.22**	–.08	–.11**	.17**	.15**	.29**	–.13**	.06	–.01	1.00
14	Governance index	.15**	.19**	–.25**	–.16**	–.02	–.12**	.13**	.33**	.02	–.26**	.03	–.25**	–.03	1.00
15	Institutional shareholding	.04	–.02	–.28**	–.14**	–.04	–.01	–.11**	.15**	–.16**	.12**	–.20**	–.02	–.22**	.24**	1.00
	M	0.9844	20.164	2.6382	0.384	0.4683	10.9469	0.0956	0.0146	0.9251	0.0129	2.0116	13.754	0.8443	53.3074	36.3675
	SD	0.5041	31.4486	1.0403	0.2682	0.5121	9.3786	0.1308	0.0301	0.2635	0.0328	0.9077	6.5557	0.3631	32.4332	12.3504

TMT = top management team.

p < .05.

Table 3 reports the main regression results with ES score as the dependent variable. Model 1 represents the analysis with only control variables and in Model 2, we test H1, regarding the impact of executive job demands on corporate sustainability. Then, in Models 3 and 4, we add the interactions of the moderating variables, TMT functional diversity and TMT tenure, with executive job demands, respectively. The coefficient of executive job demands (Model 2) is negative and significant in support of H1: When the TMT experiences a greater degree of executive job demands, members become overwhelmed by information processing demands and lack sufficient cognitive resources to focus on corporate sustainability. The interaction of executive job demands with TMT functional diversity in Model 3 indicates a positive and significant coefficient; with the same degree of executive job demands, corporate sustainability is relatively greater if the firm’s TMT exhibits greater functional diversity in support of H2. Then, by interacting executive job demands with TMT tenure in Model 4, we find support for H3 because the interaction term’s coefficient is positive and significant. With the same degree of executive job demands, a relatively higher degree of corporate sustainability performance arises if the firm’s executives have longer average tenures.

Table 3.

Random Effects Regression Results.

	Random effects model					Hausman Taylor model
	Model(1)	Model(2)	Model(3)	Model(4)	Model(5)	Model(6)	Model(7)	Model(8)	Model(9)
Executive job demands (H1)		–0.0010**	–0.0032***	–0.0061***	–0.0071***	–0.0015***	–0.0027***	–0.0038***	–0.0044***
		(0.000)	(0.001)	(0.002)	(0.002)	(0.000)	(0.001)	(0.001)	(0.001)
TMT functional diversity			–0.6183***		–0.6757***		–0.4898		–0.3813
			(0.132)		(0.141)		(0.321)		(0.293)
Executive Job Demands × TMT Functional Diversity (H2)			0.0079***		0.0083***		0.0045***		0.0041**
			(0.002)		(0.002)		(0.002)		(0.002)
TMT tenure				–0.0450*	0.0097			–0.0390	–0.0197
				(0.026)	(0.028)			(0.029)	(0.029)
Executive Job Demands × TMT Tenure (H3)				0.0021***	0.0015***			0.0009**	0.0007*
				(0.001)	(0.001)			(0.000)	(0.000)
Firm size	0.1307	0.1253	0.1434**	0.2288***	0.1258**	0.1897***	0.1942***	0.1998***	0.2004***
	(0.156)	(0.156)	(0.059)	(0.056)	(0.059)	(0.043)	(0.042)	(0.043)	(0.042)
Firm profitability	0.0032	0.0031	0.0043	0.0040	0.0037	–0.0056**	–0.0058**	–0.0050*	–0.0052**
	(0.007)	(0.007)	(0.003)	(0.003)	(0.003)	(0.003)	(0.003)	(0.003)	(0.003)
Firm leverage	–1.1862***	–1.1510**	–1.3758***	–1.5366***	–1.3482***	–0.2922*	–0.2915*	–0.2483	–0.2758
	(0.460)	(0.465)	(0.268)	(0.282)	(0.275)	(0.176)	(0.174)	(0.178)	(0.178)
R&D intensity	1.8070	1.7949	0.4793	1.7797	0.4883	1.6844	0.8909	1.5105	0.9694
	(1.833)	(1.929)	(1.147)	(1.133)	(1.124)	(1.297)	(1.280)	(1.266)	(1.269)
TMT gender diversity	0.0064	0.0014	0.0761	–0.0002	0.0183	0.0523	0.0747*	0.0555	0.0594
	(0.056)	(0.057)	(0.056)	(0.058)	(0.057)	(0.040)	(0.040)	(0.056)	(0.055)
TMT size	0.0114	0.0134	0.0072	–0.0004	0.0037	–0.0044	0.0014	–0.0056	–0.0023
	(0.104)	(0.106)	(0.025)	(0.025)	(0.024)	(0.027)	(0.027)	(0.027)	(0.027)
TMT remuneration	0.0070	0.0070	0.0077**	0.0080**	0.0105***	–0.0059*	–0.0053*	–0.0064**	–0.0058*
	(0.009)	(0.009)	(0.004)	(0.004)	(0.004)	(0.003)	(0.003)	(0.003)	(0.003)
Family firm	0.0128	0.0071	–0.0611	–0.0214	–0.0799	–0.0392	–0.0384	–0.0414	–0.0385
	(0.122)	(0.123)	(0.061)	(0.059)	(0.060)	(0.041)	(0.040)	(0.040)	(0.040)
Governance index	0.0025	0.0025	0.0028***	0.0024***	0.0031***	–0.0012**	–0.0010*	–0.0012**	–0.0010*
	(0.002)	(0.002)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)
Institutional shareholding	–0.0017	–0.0017	–0.0022	0.0002	–0.0023	0.0032*	0.0031*	0.0028	0.0029
	(0.004)	(0.005)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)
Business group affiliation	–0.1103	–0.1145	–0.0591	–0.1551*	–0.1530*	–0.4002	–0.2615	–0.0341	–0.1337
	(0.097)	(0.095)	(0.087)	(0.089)	(0.088)	(0.486)	(0.479)	(0.333)	(0.322)
Constant	0.1703	0.1738	0.6488*	0.4596	0.8746**	0.8171	0.9912	0.6145	0.8869*
	(0.153)	(0.156)	(0.346)	(0.342)	(0.346)	(0.550)	(0.695)	(0.427)	(0.520)
Observations	334	334	334	334	334	334	334	334	334
R ²	.756	.757	.761	.755	.774	—	—	—	—
χ²	—	—	—	—	—	169.1	185.4	175.5	189.2
Industry fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes

Note. The dependent variable is ES score. Robust standard errors are in parentheses. ES = environmental and social. TMT = top management team.

*p < .1. **p < .05. ***p < .01, two-tailed tests.

Model 5 presents the full model. We calculate economic effect sizes for the baseline and two moderating hypotheses, which reveal that an increase in executive job demands by 1 SD results in an approximately 22% decrease (–0.0071 × 31.4486) in corporate sustainability performance. In line with our H2 results, at mean values of TMT functional diversity (0.384), 1 SD increase in the value of executive job demands (31.45) leads to an approximately 12% decrease (31.45 × (−0.0071 + 0.0083 × 0.384)) in corporate sustainability. Similarly, for mean values of TMT tenure (2.6382), a 1 SD increase in executive job demands (31.45) leads to an approximately 9.87% decrease (31.45 × (−0.0071 + 0.0015 × 2.6382)) in corporate sustainability performance. Figures 2 and 3 display how both moderators mitigate the negative impact of executive job demands on corporate sustainability performance, to the extent that higher values of both moderators even can overcompensate for the negative impact of executive job demands.

Considering that the ES score may correlate endogenously with firm-level variables, such as firm performance and corporate governance, we performed robustness analyses using the Hausman-Taylor panel data regression for endogenous covariates. Our approach is similar to Arora and Dharwadkar’s (2011) effort to address endogeneity among corporate governance, corporate social responsibility, and firm performance. The results we obtain using this approach, related to H1 to H3, are available as Models 6, 7, 8, and 9 in Table 3; they consistently support our predictions.

Robustness Checks: Propensity Score Matching

To establish the empirical validity of our conceptual approach, we conducted several robustness checks, starting with propensity score matching (PSM). This technique creates treatment and control groups that are similar in most observable factors, so it helps reduce correlations between the treatment and observable variables. To establish similar observable characteristics among firms with greater and lesser degrees of executive job demands, we compare firms on the control variables. With the first-stage model, we generate a propensity score for all the sample firms, then identify the closest match based on firm-level financial controls and industry affiliation for firms with higher degrees of executive job demands than firms with lower degrees. For this assessment, we use the sample mean⁵ of executive job demands values for each industry, such that firms that score above the mean have a higher degree of executive job demands, and those below the mean have a lower degree. To test the effectiveness of this PSM, we determine the covariate balance between treatment and control firms (Table 4), related to whether the observable dimensions other than executive job demands, are similar across matched pairs. Model 4 in Table 4 indicates that the treatment and control groups differ significantly on four of eight dimensions before matching the propensity scores. After matching, the treatment and control groups are comparable in all dimensions. In Model 8, we find that the difference between treatment and control firms is not statistically different from zero for any of the eight characteristics, which indicates that we have created a sample of matched treatment and control firms. Finally, in a second step, we reestimate our regressions using the matched sample (N = 114). The results in Table 5 are qualitatively like those in Table 3. That is, we continue to find support for our hypotheses.

Table 4.

Propensity Score Matching (PSM) Results.

	Mean before PSM				Mean after PSM
	Model(1)	Model(2)	Model(3)	Model(4)	Model(5)	Model(6)	Model(7)	Model(8)
	Treated	Control	Difference	t-statistics	Treated	Control	Difference	t-statistics
Firm size	0.38	0.55	–0.16	–2.81***	0.46	0.42	0.04	0.63
Firm profitability	12.55	9.03	3.53	3.40***	10.98	10.72	0.26	0.20
Firm leverage	0.09	0.11	–0.02	–1.31	0.10	0.09	0.00	0.24
R&D Intensity	0.02	0.01	0.01	2.58**	0.01	0.01	0.00	–0.75
Business group affiliation	0.92	0.93	–0.01	–0.34	0.92	0.93	–0.02	–0.52
Family firm	47.32	47.07	0.25	0.12	47.24	48.04	–0.80	–0.33
Governance index	57.29	48.97	8.32	2.27**	49.33	49.37	–0.04	–0.01
Institutional shareholding	34.81	36.40	–1.59	–1.18	35.51	34.33	1.18	0.72

Table 5.

Random Effects Regression Analysis on the Matched Sample.

	Model(1)	Model(2)	Model(3)
Executive job demands (H1)	–0.0024*	–0.0048***	–0.0053***
	(0.001)	(0.001)	(0.002)
TMT functional diversity		–0.6824***
		(0.149)
Executive Job Demands × TMT Functional Diversity (H2)		0.0080***
		(0.003)
TMT tenure			–0.0566*
			(0.030)
Executive Job Demands × TMT Tenure (H3)			0.0012*
			(0.001)
Firm size	0.0516	–0.0082	0.1455*
	(0.203)	(0.082)	(0.081)
Firm profitability	0.0087*	0.0101**	0.0097**
	(0.005)	(0.004)	(0.004)
Firm leverage	–0.9862*	–0.8576***	–1.1329***
	(0.574)	(0.316)	(0.332)
R&D intensity	1.7026	–0.4307	1.4833
	(1.567)	(1.318)	(1.322)
Business group affiliation	–0.1079	–0.0138	–0.0784
	(0.088)	(0.098)	(0.103)
TMT gender diversity	–0.0248	0.0454	0.0092
	(0.046)	(0.065)	(0.073)
TMT size	–0.0306	–0.0251	–0.0395
	(0.122)	(0.033)	(0.035)
TMT remuneration	0.0176*	0.0201***	0.0180***
	(0.010)	(0.005)	(0.005)
Family firm	–0.0565	–0.1752**	–0.1044
	(0.105)	(0.073)	(0.071)
Governance index	0.0003	0.0010	0.0005
	(0.002)	(0.001)	(0.001)
Institutional shareholding	0.0010	0.0000	0.0014
	(0.006)	(0.002)	(0.002)
Constant	0.0857	0.5021	0.2431
	(0.222)	(0.340)	(0.353)
Observations	114	114	114
R ²	.926	.786	.758
Industry fixed effects	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes

Note. The dependent variable is ES score. Robust standard errors are in parentheses. TMT = top management team; ES = environmental and social.

*p < .1. **p < .05. ***p < .01, two-tailed tests.

Robustness Check: Selection Bias

During our data collection effort, we observed that firms do not consistently disclose TMT data in their annual reports. Avoiding such upfront disclosures of TMT data may be non-random and could prompt a sample selection bias. To mitigate this concern, we apply a Heckman two-step sample selection model as a robustness check. In the first step, we estimate a Probit model with a TMT disclosure dummy as the dependent variable, equal to 1 if the firm discloses TMT information in its annual report and 0 otherwise. The Heckman estimator requires exogenous variables that influence the firm’s decision to disclose TMT information but do not affect the dependent variable, ES score. Therefore, we use TMT disclosure by industry peers as the exogenous variable, along with the other control variables. This measure equals the number of firms in the same industry (2-digit NIC code) that provide disclosures of their top management in their annual reports. Any focal firm will likely follow its industry peers and disclose TMT information if most of them do. This first step generates an Inverse Mills Ratio, which we include in the second-step model to control for potential sample selection bias. 6 contains these regression results, revealing that the exogenous variable of TMT disclosure by industry peers is positive and significantly associated with the TMT disclosure dummy (Model 1). In Models 2 to 4, we report the findings on H1 to H3, respectively. They are notably similar to the results in Table 6, in continued support for all the hypotheses.

Table 6.

Heckman Selection Model Results.

	First stage	Second stage
	Dependent Variable = TMT disclosure dummy	Dependent Variable = ES Score
	Model(1)	Model(2)	Model(3)	Model(4)	Model(5)
TMT disclosure by industry peers	5.0236****
	(0.709)
Executive job demands (H1)		–0.0008**	–0.0031***	–0.0061***	–0.0071***
		(0.000)	(0.001)	(0.002)	(0.002)
TMT functional diversity			–0.6076***		–0.6576***
			(0.132)		(0.142)
Executive Job Demands × TMT Functional Diversity (H2)			0.0078***		0.0082***
			(0.002)		(0.002)
TMT tenure				–0.0472*	0.0067
				(0.026)	(0.028)
Executive Job Demands × TMT Tenure (H3)				0.0021***	0.0016***
				(0.001)	(0.001)
TMT gender diversity		0.0087	0.0805	0.0074	0.0232
		(0.056)	(0.056)	(0.058)	(0.057)
TMT size		0.0158	0.0084	0.0020	0.0052
		(0.104)	(0.025)	(0.025)	(0.024)
TMT remuneration		0.0070	0.0077**	0.0080**	0.0104***
		(0.009)	(0.004)	(0.004)	(0.004)
Firm size	–0.5381****	0.1261	0.1465**	0.2317***	0.1307**
	(0.141)	(0.155)	(0.059)	(0.056)	(0.059)
Firm profitability	0.0850****	0.0041	0.0049	0.0051	0.0045
	(0.019)	(0.007)	(0.004)	(0.004)	(0.003)
Firm leverage	–0.5253	–1.1517**	–1.3896***	–1.5377***	–1.3545***
	(1.075)	(0.455)	(0.269)	(0.281)	(0.275)
R&D intensity	–39.7671****	1.3832	0.2300	1.3321	0.2091
	(5.571)	(2.024)	(1.175)	(1.163)	(1.149)
Business group affiliation	2.6416****	–0.0958	–0.0458	–0.1364	–0.1394
	(0.532)	(0.098)	(0.088)	(0.090)	(0.089)
Family firm	0.8909***	0.0233	–0.0491	–0.0053	–0.0666
	(0.273)	(0.105)	(0.063)	(0.059)	(0.061)
Governance index	0.2325****	0.0028	0.0030***	0.0027***	0.0033***
	(0.046)	(0.002)	(0.001)	(0.001)	(0.001)
Institutional shareholding	0.0786****	–0.0012	–0.0019	0.0007	–0.0018
	(0.011)	(0.004)	(0.002)	(0.002)	(0.002)
Inverse Mills ratio		0.0871	0.0567	0.0945	0.0661
		(0.078)	(0.058)	(0.058)	(0.057)
Constant	–9.9660****	0.1303	0.6100*	0.4235	0.8370**
	(1.801)	(0.147)	(0.348)	(0.342)	(0.347)
Observations	732	334	334	334	334
Pseudo R²	.627	—	—	—	—
R ²	—	.759	.762	.758	.775
Industry fixed effects	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes

Note. Robust standard errors are in parentheses. TMT = top management team.

*p < .1. **p < .05. ***p < .01, two-tailed tests.

In another post hoc test, we looked at whether the years surrounding the global financial crisis and the Covid-19 pandemic had any effect on corporate sustainability performance. We created three dichotomous variables for this: financial crisis (years 2007, 2008, and 2009), post financial crisis (years after 2009), and Covid years (2020 and 2021). We created three interaction terms with executive job demands using three dichotomous variables; however, we did not find significance of these interaction terms in our analysis.⁶

Discussion

With this study, we examine the influence of executive job demands, a key feature of the organizational and environmental job context around top executives (Hambrick, 2007; Hambrick et al., 2005), on corporate sustainability performance. As we theorize and confirm, greater executive job demands imply lesser corporate sustainability. But if firms’ TMTs exhibit greater functional diversity and average tenure, this relationship is weaker.

Corporate sustainability has considerable benefits for firm performance, but sustainability practices also are lacking among many companies worldwide. Existing research suggests that corporate sustainability reflects the demographic characteristics of firm executives, such as their age, gender, education (Manner, 2010), functional experience (Henry et al., 2019), nationality (Bertrand et al., 2021), and TMT size (Tacheva et al., 2020), or else their psychographic attributes, such as CEO hubris (Arena et al., 2018), values (Schaefer et al., 2020), beliefs (Graafland et al., 2007), and cognitive complexity (Gröschl et al., 2019). Such contributions offer valuable insights about the impact of TMT attributes on corporate sustainability performance, but they largely ignore the pertinent influence of the task environment, despite Hambrick and colleagues’ (2005) caution that investigating factors related to TMT decision-making without including their task demands is insufficient. Because TMT agency strongly determines whether and how the firm develops internal capabilities to find novel solutions and coordinate with external constituencies to achieve social, environmental, and economic objectives, sustainability scholarship must account for heterogeneity in TMTs’ organizational and environmental job contexts as also recommended by prior literature (Finkelstein et al., 1996; Hambrick et al., 2005).

In extending the well-established concept of job demands, Hambrick and colleagues (2005) and Hambrick (2007) already have introduced the notion of executive job demands, stemming from both organizational (internal) and environmental (external) factors (Hambrick et al., 2005), and the strain they impose on the non–scale-free resources of top managers (Penrose, 1959). In turn, we extend the notion of executive job demands to corporate sustainability research domains, with the prediction that greater executive job demands impinge on managers’ bounded cognitive capacities (Cyert & March, 1963), which limits their ability to process information from various stakeholders (Bansal, 2005), develop novel knowledge, and devote resources to devising innovative corporate sustainability tactics efforts (Annunziata et al., 2018; Darnall & Edwards, 2006). Therefore, we postulate and find empirical support for our hypothesis that greater job demands imposed on executives can imply poorer corporate sustainability performance by the firm.

Drawing from upper echelon theory (Hambrick & Mason, 1984), we also establish two contingent relationships. First, we identify a contextual impact of TMT functional diversity (Hambrick et al., 1996; Hoffman & Maier, 1961), which offers the advantages of broader cognitive capacities and thus helps firms manage challenging corporate sustainability efforts. Greater functional diversity also provides nonredundant information, a resource that can help the firm deal with the unpredictability of dynamic, complex task environments (Farjoun & Levin, 2011; Schneider et al., 2017). As we show, a greater degree of TMT functional diversity mitigates the negative impact of executive job demands on corporate sustainability. Second, long-tenured TMT members possess firm- and job-specific skills, wider social networks, and a deep understanding of internal and external task environments (Kor, 2003; Westhead et al., 2001), so they can manage the paradoxical demands of economic and sustainability initiatives more effectively. Compared with firms with short-tenured TMTs, those whose top executives have had longer stints are better able to deal with the challenges evoked by executive job demands, so those demands then have a weaker negative influence on corporate sustainability performance.

Contributions

Our findings provide innovative evidence that the job demands that confront executives, which depend on the firm’s organizational and environmental context, can also influence the firm’s corporate sustainability. Our study represents an initial application of the relevant construct of executive job demands, derived from upper echelon theory (Hambrick, 2007; Hambrick et al., 2005), to anticipate corporate sustainability performance. As a contribution to executive job demands theory, we validate objective measures of the organizational and environmental context and add to a nascent stream of research that relies on primary measures (Zhu et al., 2022). By identifying a relevant impact of executive job demands on firm-level outcomes, we seek to extend an important offshoot of upper echelon theory. Furthermore, we delineate the role of several demographic attributes of the TMT, which act as potent resources and can shield firms from the adverse effects of job demands on their corporate sustainability.

For managerial practice, this study answers the recent calls to examine the firm’s allocation of decision-making to address sustainability challenges (Aguilera et al., 2021) and represents a wake-up call, related to board governance structures. The board must carefully monitor the firm, in terms of the job demands placed on its top management, because extreme demands may have negative implications for corporate sustainability. Boards of directors should be proactive in anticipating the increased executive job demands resulting from the degree of internationalization and the increased industry complexity brought on by hyper-competition. A proactive planning of TMT bandwidth with pertinent attributes may assist incumbent management in meeting increased job demands so that the firm can achieve equilibrium and have sufficient resources to achieve the economic bottom line but also pursue sustainable development goals through corporate sustainability (UN Security General, 2019). Our moderating hypotheses also offer practical mechanisms they can use to mitigate the impact of executive job demands and help the firm achieve corporate sustainability goals.

Limitations and Research Directions

This empirical research study features several limitations. We anticipate substantial correlations of objective antecedents of job demands with the actual degree of complication a TMT faces, but we do not account for the subjective experiences of executives. Perceptual metrics of job demands, gathered from the TMT, could provide triangulated confirmation of our findings. Our sample consists of large firms, reflecting data availability; extending the conceptual model to medium and small firms would be interesting (Arora & De, 2020). Further research might account for transient internal or external factors that increase executive job demands to learn their impact on sustainability programs. Such surges in demand might result from abrupt changes in a firm’s corporate scope, such as mergers and acquisitions, or discontinuities in the external environment, such as technological, regulatory, or economic shocks.

As is common in empirical studies, we test the theoretical underpinnings in a single country context, which may restrict the generalizability of our findings. Our conceptual arguments about the influence of executive job demands on corporate sustainability are generalizable and can be evaluated easily in other contexts. A multicountry investigation also might reveal the potential implications of national cultures, ownership structures, and governance systems, which influence managers’ job demands and, thus, corporate sustainability (Walls & Berrone, 2017). In India, for example, power distance values tend to be high, supporting greater centralization of power in response to greater executive job demands. In cultures marked by lower power distance, middle-level managers instead might insist on their autonomy. Furthermore, if faced with particularly intense job demands, managers likely seek to reduce their information processing and search costs, such as by mimicking other firms’ sustainability processes (DiMaggio & Powell, 1983), so further research might investigate these effects.

Conclusion

Implementing corporate sustainability requires the TMT’s agency. Because greater executive job demands, arising due to internal and external complexities, limit the cognitive bandwidth of managers and centralize their decision-making, they negatively impact corporate sustainability performance. Drawing on upper echelon theory, the current study also confirms a pertinent role of the demographic attributes of the TMT. With a novel theoretical lens, we gain new insights into the impact of the objective task environment surrounding the firm’s strategic leadership on its corporate sustainability performance. These insights can help firms and governing bodies encourage more exhaustive efforts to keep up with the challenging task of achieving sustainability while functioning in highly demanding task environments.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Manish Popli

Notes

Author Biographies

Manish Popli is an associate professor of Strategy and International business at the Indian Institute of Management, Indore, India. His current research on emerging markets uses the theoretical lenses of institutional theory, governance structure, managerial cognition, and other behavioral theories. His works have appeared in Asia-Pacific Journal of Management, Finance Research Letters, Global Strategy Journal, Journal of Business Research, Journal of Knowledge Management Journal of International Business Studies, Journal of International Management, Journal of World Business, and Management and Organization Review, among others.

Mehul Raithatha is a professor in accounting and finance area at the Indian Institute of Management, Indore, India. His research interests include financial reporting, corporate governance, emerging markets, and earnings quality. His works have appeared in Finance Research Letters, The International Journal of Accounting, International Review of Finance, Journal of Business Research, Journal of Contemporary Accounting and Economics, and Journal of Corporate Finance, among others.

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