Abstract

This paper compares the environmental performance of family-controlled public corporations with that of nonfamily controlled companies. Using institutional theory and insights drawn from organizational identity, corporate governance, environmental management, and family business literature, we formulate the following arguments.

First, family owners share certain features such as a strong personal attachment to the firm and desire to portray a good corporate image and reputation. Moreover for family owners, personal and organizational identity tend to be isomorphic, providing a distinctive organizational identity. Given these common features family firms are more likely to pursue environmental strategies to avoid being stigmatized as an irresponsible corporate citizen.

Second, the family firm is more sensitive to the needs and pressures of the surrounding communit, the degree of “local roots” augments the family firm’s motivation to project a desirable community image and thus reduce its environmental footprint.

Third, because of greater monitoring capacity and unique social dynamics, family firms tend to rely less on long term financial incentives as a mechanism to promote responsible environmental behaviors among top executives. Lastly, because they are at the core of what a family firm’s identity represents, greater presence of family members in the firm’s governance structure and higher family stock ownership result in a concomitant improvement in observed environmental performance.

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