CEO Values, LGBT Friendly HR Policies and Firm Performance: Shared Political Ideologies as a Source of Managerial Discretion

Why do CEOs implement certain policies? Upper echelons theory (UET) argues that managers implement policies based on their cognitive base and values. Then, why do CEOs often fail to bring about organizational change? Managerial discretion theory (MDT) posits that CEOs can implement their favored actions when powerful key stakeholders (PKS) approve of those actions. This dissertation contributes to UET by providing empirical support that CEO values influence corporate policies. Using LGBT HR as a context and political ideology as a proxy for values, I show that CEOs inject their values into human resource policies. I contribute to the managerial discretion literature by showing that discretion is influenced by the values of the CEO vis-à-vis the values of PKS. When conservative CEOs shared similar values as their board, their firms had lower levels of LGBT HR. However, when the board was liberal, their firms had higher levels of LGBT HR. Thus, the values of the board affect managerial discretion. However, does LGBT HR matter? To answer this question, the relationship between LGBT HR and firm performance was examined. This dissertation failed to find a direct relationship between LGBT HR and firm performance; however, this relationship was found to be moderated by the proportion of liberal employees. Namely, the positive relationship between LGBT HR and firm performance was strengthened when firms had a greater proportion of liberal employees. In sum, values matter; they influence the implementation and effectiveness of corporate policies.