Executive ownership is a mechanism that addresses agency problems by aligning the financial goals of management with those of shareholders. We explore whether executives' financial objectives are also aligned with the goals of stakeholders other than shareholders. We show that executive financial goals, measured as equity ownership and insider trading intensity, was negatively associated with US firms' environmental and social performance in the period 2002-2019. A quasi-natural experiment suggests that such inverse relationship was causal. Therefore, our results support the existence of new agency issues for firms aiming to maximize stakeholder value on the environmental and social dimensions. Our finding reinforces the call for novel mechanisms to incentivize managerial efforts towards sustainability goals.
Executive ownership and the agency of corporate sustainability
Marco Ghitti
;
2026
Abstract
Executive ownership is a mechanism that addresses agency problems by aligning the financial goals of management with those of shareholders. We explore whether executives' financial objectives are also aligned with the goals of stakeholders other than shareholders. We show that executive financial goals, measured as equity ownership and insider trading intensity, was negatively associated with US firms' environmental and social performance in the period 2002-2019. A quasi-natural experiment suggests that such inverse relationship was causal. Therefore, our results support the existence of new agency issues for firms aiming to maximize stakeholder value on the environmental and social dimensions. Our finding reinforces the call for novel mechanisms to incentivize managerial efforts towards sustainability goals.
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