An Organizational Identity Orientation Perspective on CEO Turnover Following Misconduct

Misconduct poses a significant threat to organizations, as these unethical and illegal actions result in loss of credibility and market value in addition to harming environmental and societal well-being. Because of the importance of the CEO in making organizational decisions and “setting the tone,” research has identified CEO dismissal as an important consequence of misconduct. However, not all CEOs are punished for misconduct. Contrasting extant studies which highlight governance structures in explaining turnover following misconduct, we build from theory on organizational identity orientation to suggest that this may be the product of firm-level factors. Using a sample of S&P 1000 firms from 2000-2018, we conduct word embedding and natural language processing on letters to shareholders to capture organizational identity orientation, and find that organizational identity orientation influences CEO turnover following misconduct. Our findings have important theoretical and practical implications to organizational identity and misconduct.