The Ties That Bind Or Those That Tear Us Apart? Co-CEO Constellations And ESG Performance In Family Firms

While the prevailing perspective on executive leadership has emphasized the effectiveness of a unified command structure, family firms frequently adopt shared leadership structures such as dyads, triads, and larger co-CEO constellations. Given the prevalence of these structures in family firms, it is crucial to understand how family involvement in the firm shapes the dynamics of co-CEO constellations and their implications for firm outcomes. Drawing on the socioemotional wealth (SEW) perspective, we propose that the salience of extended SEW concerns increases the costs associated with a shared leadership structure, ultimately leading to a negative impact on environmental, social, and governance (ESG) outcomes. Our empirical analysis of panel data on 76 Italian firms listed on the Milan Stock Exchange during 2003–2020 suggests that a co-CEO structure is associated with negative ESG performance outcomes in family firms, while observing a positive relationship in nonfamily firms. We find that the negative effect for family firms stems from family-induced cognitive diversity, manifested via the inclusion of both family and nonfamily members or family members from different generations in co-CEO constellations. We then provide empirical evidence that the negative effect of the co-CEO structure on ESG performance is mitigated and turns positive when one of the co-CEOs is also chairing the board. These findings advance our understanding of how family involvement in the shared leadership structure shapes a firm's ethical orientation, having important implications for the governance of family firms.