CEO Communication during Strategic Change: A Regulatory Focus Perspective

Abstract

The study examines CEO communication in times of strategic change based on regulatory focus theory that describes individuals’ promotion and prevention focus. While promotion-focused individuals strive for maximizing gains, prevention-focused individuals strive for minimizing losses. As CEO communication is especially relevant during strategic changes, when fundamental processes and beliefs are affected and employees need sense-making and meaning-making contributions, the paper analyzes the regulatory focus of CEO letters to shareholders in annual reports and links it to the intensity of change that the organization is currently executing. The paper first develops existing analysis tools further and examines regulatory focus of CEOs as well as the type of change qualitatively from annual reports. Secondly, the paper ties the intensity of change to the CEO regulatory focus quantitatively. Results indicate a persistence of both promotion as well as prevention elements in CEO letters to shareholders. While controlling for contextual variables of the organization, the findings furthermore show a positive association between a more promotion-focused CEO letter to shareholders and the intensity of the organization’s change.

Keywords: CEO Communication, Strategic Change, Regulatory Focus Theory, Promotion Focus, Prevention Focus