2.1. Literature Review
According to upper echelon theory, the heterogeneity (in terms of past experience, personality traits, and demographic characteristics [
29]) of senior executives influences a firm’s decision making on production processes and operations. Considering this theory in relation to this study’s topic, whether a firm effectively practices social responsibility is closely related to the values of its senior executives. For example, the values formed from experience (CEOs’ academic experience, functional department background, gender, tenure, and so on) influence the CSR performance [
16,
30]. Moreover, some special values, such as political consciousness [
31], materialism [
32], and self-confidence [
33], have an impact. Furthermore, changes in the TMT composition, as a major change experienced by a firm, have different effects. For instance, data from the United States show that a change in CEO negatively affects CSR performance [
34], while data from China shows that CEO succession improves a firm’s CSR performance [
7]. Moreover, upper echelon theory has been applied in TMT research. Earlier studies show that the heterogeneity and characteristics of the TMT are the two most relevant factors for the current research. Other studies show that the TMT pays great attention to the support of social ethics and strengthens the harmony between the TMT and the environment [
35], as influenced by the TMT members’ education and overseas experience [
36] and tenure and gender [
37,
38]. Moreover, the diversity of the TMT personnel brings multiple perspectives to the team [
26] and sharing social responsibility plays a role in easing the relationships among TMT members. At the same time, executives with different characteristics have different attitudes towards the long-term development of the firm. Executives who consider the long-term development of a firm pay more attention to the improvement of the firm’s future performance and thus focus on strategies that may not result in short-term benefits but are favourable in the long term, such as good supply chain and customers relations [
39], environment-friendly innovation [
40], and the fulfilment of social responsibility [
15]. Having such a long-term performance focus requires that the firm not be concerned about lower performance in the present and have considerable resources to meet unstable income in the future. Although current analyses of the TMT’s characteristics improve on the one-sidedness of previous analyses that consider only a single executive’s characteristics and experiences and the current analyses enrich the role of the TMT as a decision-making team in the firms [
14,
29], these analyses take a static perspective. Changes in TMT personnel occur more frequently than changes in core personnel, such as the CEO or chairman; this consequently modifies the characteristics of the TMT. Therefore, it is necessary to analyse the impact of the overall variability of the TMT on the overall sustainable development of a firm from a dynamic perspective.
Theoretically, exploring the overall variability of the TMT can provide, to a certain extent, insights into the current development and decision-making views of the firm. On the one hand, the development of a firm can be considered speculative in that the firm that can realise cash in the short term pays more attention to marketing [
41] and iteration of technology integration [
42], so as to quickly enter relevant markets, occupy a niche in the market, and reap the corresponding benefits. Once the business situation changes, the investment is immediately withdrawn, the relevant department is dissolved, and the senior executives are dismissed. Firms that focus on cultivating the market and intend to operate in the market for a longer timeframe pay more attention to developing the relevant talents [
43] and continuously invest the necessary resources to promote the firm’s long-term development. On the other hand, decisions made by a firm in response to the external environment affect the business situation of the firm, especially the decision making of the TMT. Compared with a firm that focuses on long-term development, one that focuses on short-term interests pays more attention to short-term tactical adjustments when a long-term sustainable strategy is relatively more difficult, and in this case, the consistency before and after a decision is made is even less [
44], which is reflected in frequent changes in personnel positions within the firms. Compared with other personnel changes, those within the TMT have a stronger impact on the decision-making and development views within the firm because of the team members’ particularity. Internal and external personnel can reflect on the utilitarian and sustainable development plans of the firm by observing the change frequency among the TMT [
43]. The variability of senior executives may also reflect whether a firm truly appreciates talent, rather than simply focusing on the personnel’s immediate contribution, and may also indicate whether the firm values long-term, sustainable development.
2.2. Hypotheses Development
When the handover between outgoing and incoming TMT members is executed properly, the range of change in task outcomes related to that position is small. This ensures continuation in team atmosphere as well. Furthermore, a state of stability is evident. On the contrary, when many managers change in a short time, there will be an atmosphere of panic, short-sighted behaviour, and reduced strategic behaviour [
45]. At this time, the TMT is in an unstable state. As a long-term strategic investment, CSR brings corporate financial performance (CFP) to firms [
46], improves consumer loyalty [
47], and reduces the sudden decline in performance caused by negative behaviour [
48]. Considering the CSR benefits, this study proposes that a stable TMT serves as a foundation for developing efficient management skills, thereby allowing integration of information, balancing of various stakeholder interests, reduction of asymmetries in rights and responsibilities, and improvements in the performance of social responsibility.
First, a stable TMT has formed a tacit understanding with a good cooperation atmosphere and has a sense of collective honour. Moreover, through long-term cooperation, the TMT can form lines of communication with all parties, resulting in the rapid transmission of information. To succeed, a firm’s strategy requires a long-term investment and continuity [
49]. Continuously updated information flow can bring clear external environmental information and organisational resource information to a firm, which helps in the formulation of a strategy that is more in line with the social environment and available resources [
50,
51]. The unique communication mode formed by a stable TMT takes time to establish. As a country with strong collectivism, it is easier for China to form a working atmosphere with a sense of collective honour in a stable TMT. This atmosphere makes the TMT pay more attention to the collective image and maintain the collective reputation [
52]. In the unstable TMT, due to the large number of personnel changes, the collective atmosphere is difficult to inherit, with a frequent change in members, and advocates fighting among individuals. CSR can create a good image for the firm, establish brand reputation, and allow the senior management team to develop a good reputation [
1,
7]. In a less stable TMT, due to the short stay of personnel, they fail to form a tacit understanding [
53], thus reducing the efficiency of communications. CSR is oriented towards stakeholders such as employees, society, and the environment; timely communication is necessary to position the firm’s resources appropriately [
54].
Second, while respecting the interests of shareholders, a stable TMT will also pay attention to stakeholders and seek benefits for the environment, employees, and consumers. When a firm changes a large number of executive members, the newly added managers will be dismissed for fear of lack of legitimacy [
7] and the remaining executives will focus on short-term performance to avoid dismissal [
55]. As a non-main assessment item, CSR is not regarded as a key focus. At the same time, fulfilment of social responsibility is a long-term project and the stability of financial performance income is low [
56], and sometimes, CSR has a negative impact on financial performance [
57,
58]. Therefore, it is impractical for new executives to focus on CSR. Moreover, to reduce the threat of dismissal, new executives care more about CFP than CSR performance [
59]. As such, in a TMT with low stability, the members face greater pressure on CFP and are more inclined to reduce focus on social responsibility, to seek improvement in financial performance. In the long-term cooperation process, a stable TMT forms a tacit understand and the members respect each other’s interest. Compared with firms that have an unstable TMT, those with a stable TMT face lower financial performance pressure, and the TMTs focus more on the long-term development of the firm and the rights and interests of relevant stakeholders [
60].
Finally, in firms with a stable TMT, the division of responsibility and power is relatively clear; as such, the prevarication of responsibility when placing blame is reduced and the responsible person pays more attention to fulfilling social responsibility. In a TMT with low stability, due to the frequent personnel turnover, a certain degree of overlap and omission in the implementation and task arrangement among senior managers is common, resulting in errors in terms of right and responsibility allocation, reduced team cohesion [
51], and difficulty in completing the final task. Social responsibility is a marginal task in a firm [
61]; thus, it is more prone to mismatch when TMT stability is low. It is also difficult to find the responsible person after an incident, which impacts the completion of follow-up tasks. In firms with a stable TMT, when the responsibilities and rights are relatively clear, senior managers can do their best to complete their duties. They can also identify the responsible person when performance is poor, improve the quality of decision making, and complete the strategic objectives [
62]. Activities concerning social responsibility may be considered unnecessary and yet be a high moral requirement; as such, there is a tendency to place blame. When the performance of social responsibility is poor in a firm with a stable TMT, it is more difficult for TMT members to avoid their responsibility because of the effect on public relations. Meanwhile, in firms with an unstable TMT, the performance of social responsibility is poor, the members may place blame on the previous senior managers, the TMT may not be able to avoid a negative situation with its lack of understanding of the current social performance, and the public might increase its criticism. Based on the analysis above, this study proposes that TMT stability is an important factor affecting CSR performance:
Hypotheses 1 (H1). TMT stability has a positive impact on the CSR performance.
It further proposes that the effects of TMT stability on CSR performance are not homogeneous and both resource endowment and early financial performance influence the relationship between TMT stability and CSR performance. Specifically, given the same level of TMT stability, different firm characteristics lead to different levels of CSR performance. Considering these factors, this study further investigates the mechanism of the relationship between TMT stability and CSR performance, mainly from the aspects of early performance (performance aspiration gap) and resource endowment (slack resources).
The performance aspiration gap arises from the difference between the actual performance and the target performance. When the actual performance is higher than the target performance, this is called a performance aspiration surplus, and when it is lower, it is called a performance aspiration deficit [
63]. Different aspiration performance measurement standards are important for measuring the final state. On the one hand, a firm needs to consider its historical development factors to measure its status [
63]; on the other hand, a comparison with the development level of the industry can show the competitive state of a firm [
64]. Based on these two considerations, we can measure the current state of a firm more accurately. Because of performance aspiration, the surplus and deficit will affect the judgement of the TMT regarding the current operations [
63] and the shareholders have priorities that differ from those of senior management. Therefore, given TMT stability at similar levels, the willingness of the TMT to perform social responsibility will vary under different early performance states.
When the early performance of a firm is characterised by a surplus of performance aspiration, the actual performance “exceeds” the performance expectations and the senior executives determine the status as a “gain” that proves that the previous business strategy was effective, thereby establishing their legitimacy [
65], and the shareholders recognise the TMT’s performance. Social responsibility serves as the link between the stakeholders. When the TMT completes a task, even if it performs poorly in its social responsibility, this is hardly a reason for dismissal. Relevant studies also show that the main reason for the dismissal of executives is low financial performance [
66]. In other words, executives with insufficient ability are dismissed by the governance team [
18]. Moreover, this performance aspiration surplus increases the senior executives’ reliance on favour and arrogance and encourages self-interest with the knowledge of delivering on financial performance. When there is a performance aspiration deficit, the organisational state is considered a “loss”. In such a state, the governance team exerts pressure on the TMT. In addition to strategic change [
67], the TMT needs to reduce the pressure brought by shareholders in donation. As a strategy to cushion the pressure, fulfilling CSR can show goodwill to stakeholders; it can be employed as a marketing strategy [
68] to enable subsequent performance improvement and address character-related risks [
69]. In summary, given similar levels of TMT stability, the pressure faced by the TMT attributable to performance aspiration surplus or deficit would differ, resulting in differences in the motivation to perform social responsibility. Therefore, this study proposes that:
Hypotheses 2 (H2). In firms with a performance aspiration surplus, the relationship between TMT stability and CSR performance is weakened.
Slack resources are resources that are left in the firm after the current actual needs of the firm are met [
70]. According to the organisation theory, slack resources can allow firms to offset part of the external impact on the organisation in the face of difficulties, thereby having a buffer effect [
71]. They can also enable transformation when the organisation needs resources to provide support for the organisation’s strategy [
72]. However, agency theory holds that slack resources, as resources that have not been maximised, are controlled by the TMT when left in the organisation, which makes it easy for senior managers to abuse resources to gain job benefits [
73] and engage in managerial empire building [
74]. Meanwhile, other studies show that slack resources can easily lead to low firm management efficiency [
75]. Both slack and mismatched resources lead to the failure of the firm to achieve the best operational efficiency, resulting in the reduction of resources applied to fulfil social responsibility [
76]. According to the pyramid model of social responsibility, firms are willing to perform higher-level social responsibility only after meeting their economic responsibility [
61]. Although having slack resources enables a firm to avoid risks to a certain extent, there are associated costs, such as waste of resources and exposure to the self-interest of executives. As such, resources that should have been used to fulfil social responsibility remain in the organisation, resulting in a waste of resources. Therefore, this study proposes that:
Hypotheses 3 (H3). In firms with abundant slack resources, the relationship between TMT stability and CSR performance is weakened.