Summary: How do situational factors influence CEOs’ ways of pursuing goals? To answer this question, our recent study examines CEO regulatory focus, which consists of two motivational orientations—promotion focus (growth-oriented) and prevention focus (security-oriented). The study considers how CEOs’ job demands, stemming from relative firm performance, stakeholder activism, and CEO tenure, affect the CEO’s regulatory focus. The results show that relative firm performance affects CEO promotion focus, and that the strength of this effect depends on CEO tenure and stakeholder activism. 

In our article on “Understanding the Situational Antecedents of CEO Regulatory Focus”, recently published in the Journal of Management Studies, we investigate how situational factors reflective of CEOs’ job demands influence CEOs’ regulatory focus. Regulatory focus refers to two motivational orientations—promotion focus (growth-oriented) and prevention focus (security-oriented)—that drive goal pursuit. We build on the idea that regulatory focus is not a stable trait but that it can vary with situational demands. Then, we explore how CEOs’ job demands, stemming from relative firm performance, stakeholder activism, and CEO tenure, affect the CEO’s regulatory focus. 

What we expected to find 

1. CEO Regulatory Focus as a Dynamic Trait: 
   Traditionally, CEO regulatory focus has been studied as a relatively stable construct. However, we challenge this by arguing that situational factors that create job demands significantly influence this focus. Both promotion and prevention focus can shift based on external pressures, requiring a more dynamic perspective on executives’ motivations. 

2. Impact of Relative Firm Performance: 
   We propose that CEO regulatory focus is closely tied to a firm’s performance relative to its competitors. When performance is poor, CEOs are more concerned about their own job security and thus more likely to adopt a stronger prevention focus, concentrating on minimizing losses and managing risks. In contrast, when performance improves, CEOs are more inclined toward a stronger promotion focus, seeking to capitalize on growth opportunities and take strategic risks. 

3. Moderating Role of Stakeholder Activism: 
   Stakeholder activism intensifies the relationship between firm performance and regulatory focus. Activism increases job demands and amplifies the CEO’s sensitivity to performance fluctuations, pushing CEOs to adopt a stronger prevention or promotion focus depending on the firm’s performance trajectory. In cases of poor performance, activism heightens CEOs’ prevention orientation and reduces their promotion orientation, while the opposite is the case in favorable conditions. 

4. Influence of CEO Tenure: 
   CEO tenure dampens the effect of relative performance on regulatory focus. Longer-tenured CEOs tend to have lower aspirations, which makes them less sensitive to performance changes and, ultimately, less likely to adjust their focus in response to performance shifts. Over time, CEOs with longer tenures exhibit more complacency, reducing their likelihood to adopt a strong promotion or prevention focus based on situational changes. 

What we found and what it means 

1. Analysis and Results: 
   We analyzed a sample of 594 CEOs across 377 publicly listed U.S. companies over a decade. We found support for our arguments on the impact of relative firm performance and CEO tenure on CEO promotion focus. We also found some support for the effect of stakeholder activism on CEO promotion focus.  

2. Implications for Strategic Decision-Making: 
   Our findings imply that CEOs are not mentally isolated from the world around them. They are heavily impacted by external factors that create job demands for them. This has broad implications for corporate governance, suggesting, for instance, that boards and investors need to consider situational aspects when selecting, monitoring, and supporting CEOs. In particular, if firms are doing poorly, but boards want CEOs to have a mindset that focuses on growth and advancement, they may have to actively reach out to and influence their CEOs, especially at the beginning of the CEOs’ tenures. 

3. Future Research Directions: 
   We propose that future research should explore how external factors impact a broader range of psychological characteristics of CEOs. For example, scholars might investigate fluctuations in CEOs’ self-esteem, personality, or creativity over time in response to external pressures and changes. 

In summary, we provide insights into how CEO regulatory focus is shaped by situational features, offering a more comprehensive view of executives’ psychology. Our findings highlight the importance of considering dynamic external factors in the strategic leadership and governance of firms.