When companies face high-stakes decisions, such as entering a new market, restructuring operations, or investing in uncertain innovations, they rely on their CEOs to provide strategic direction. Of course, different CEOs respond to different situations in different ways. Some drive bold change, while others adopt a more cautious approach. What explains this divergence? While personality traits and values certainly matter, we highlight another important factor: a CEO’s motivational orientation. Specifically, their regulatory focus—a psychological construct that reflects how individuals pursue goals—can significantly influence their behavior and decision-making^1-3. While CEOs with a promotion focus are driven by aspirations and growth, those with a prevention focus prioritize security and risk avoidance². Although common knowledge suggests that a CEO’s regulatory focus is mostly stable, we wonder if it’s possible that a CEO’s motivational orientation could vary situationally?

Our recent study published in the Journal of Management Studies introduces a situational perspective on the CEO’s regulatory focus⁴. We argue that CEOs are not consistently risk-seeking or risk-averse; rather, their orientations shift in response to external demands. Specifically, firm performance influences whether CEOs adopt a promotion focus (emphasizing growth and advancement) or a prevention focus (emphasizing caution and risk avoidance). This relationship is further influenced by two factors: stakeholder pressure increases CEOs’ responsiveness to performance signals, while longer tenure makes them less likely to adjust their orientation in response to changing conditions⁴. This dynamic understanding of CEO motivation has important implications for corporate governance, strategy, and leadership development.

Understanding Regulatory Focus

The concept of regulatory focus originates from motivational psychology and refers to two distinct goal-pursuit orientations^1,2:

• Promotion focus, which is oriented toward achieving gains, advancement, and realizing potential. Individuals with this focus are more likely to pursue ambitious goals, explore new opportunities, and tolerate uncertainty.
• Prevention focus, which is oriented toward avoiding losses, fulfilling responsibilities, and maintaining stability. Individuals with this focus emphasize careful planning, risk mitigation, and compliance.

While these orientations are often treated as traits—stable patterns of thought and behavior—we argue that regulatory focus changes in response to situational factors that reflect different aspects of the job demands CEOs face. CEOs face performance pressure, which we argue that this activates either a promotion or prevention focus⁵. In addition, shareholder activism and CEO tenure shape how strongly these situational cues influence the motivational orientation.

Understanding regulatory focus in this way allows for a more dynamic perspective on leadership behavior. It provides a useful framework for analyzing not only what CEOs do, but why they may choose one strategic path over another, even under comparable circumstances.

Three Situational Drivers of CEO Regulatory Focus

We assess how the CEOs motivational orientation is shaped by the context around them. A key factor is how well the firm is performing relative to its peers. When things are going well, CEOs tend to adopt a growth-oriented mindset; when performance slips, they become more cautious⁵. But that’s not the whole story. Stakeholder activism—pressure from investors, the media, or advocacy groups—acts as an amplifier: making strong performance feel like a green light to push further, or poor performance feel even riskier. And then there’s tenure. The longer a CEO has been in the role, the less likely they are to adjust their mindset in response to these signals. In other words, context matters—but so does how long the CEO has been immersed in that context. To understand how these dynamics unfold in practice, it’s worth looking more closely at each of these factors in turn.

1. Relative Firm Performance

Among the various factors shaping how CEOs pursue goals, we identify relative firm performance—how a company performs compared to its direct competitors—as the most influential^5-7. While absolute performance matters, performance in context is often what counts most for CEOs, boards, and other stakeholders. Competing firms face similar environmental constraints, making comparisons across peers especially meaningful^8,9. CEOs are evaluated within this competitive frame, and the perception of how well—or poorly—they are doing relative to others plays a key role in shaping their motivational stance.

When performance is weak, CEOs are likely to experience pressure to protect the firm’s position and their own. Concerns over job security and reputation become more salient, and the focus of leadership often shifts toward minimizing losses and avoiding further decline¹⁰. This activates a prevention focus—a mindset oriented around risk aversion, fulfilling responsibilities, and ensuring stability. The CEO’s goals become more about damage control than long-term advancement. Strategic initiatives may be postponed or scaled back, and decision-making narrows toward caution and control.

In contrast, when the firm is outperforming its peers, CEOs are more likely to feel secure in their role and optimistic about the future. This creates a psychological environment that supports a promotion focus—an orientation toward growth, innovation, and forward-looking ambition¹¹. Under these conditions, CEOs may be more inclined to take calculated risks, pursue strategic investments, or drive transformative initiatives. Their attention shifts from “What must I avoid?” to “What could we become?”

Crucially, this shift in mindset is not just a rational calculation of risk and reward. It reflects a deeper motivational mechanism. We argue that relative performance alters how CEOs perceive their position: it changes whether they feel they should prevent failure or could pursue something greater. Even temporary changes in relative performance can reshape this perception—making regulatory focus a dynamic, context-sensitive element of executive behavior.

2. Stakeholder Activism

CEOs operate under constant scrutiny—not only from their boards and shareholders but also from a growing array of vocal stakeholders^3,12,13. Institutional investors, advocacy groups, the media, regulators, and even the broader public increasingly weigh in on how firms are governed and what responsibilities they should uphold. One especially salient and formalized channel through which this pressure is exerted is the shareholder proxy proposal^3,14,15. Unlike public boycotts or social media campaigns, proxy proposals require share ownership and a significant investment of effort, making them a pointed and credible form of activism. For CEOs, they signal more than dissatisfaction—they are a direct challenge that calls for a response.

In our study, we view stakeholder activism not as a direct driver of CEO motivation, but as a force that amplifies the influence of firm performance. When performance is poor, activism tends to feel like a public rebuke [16]. It draws attention to leadership failures, tarnishes reputations, and increases the likelihood of board intervention. For CEOs, this raises the stakes. The result is a heightened prevention focus—a stronger inclination to play it safe, protect what remains, and avoid further losses. Strategic initiatives are likely to be postponed, communications become more cautious, and the emphasis shifts toward fulfilling obligations and avoiding missteps. But the relationship isn’t purely negative. When performance is strong, the same activism can have a galvanizing effect. CEOs in this situation may feel emboldened rather than threatened. Activist proposals can help identify areas for further advancement, such as sustainability initiatives, governance reforms, or workforce equity measures^15,17,18. These issues resonate with a promotion focus, reinforcing a CEO’s drive to innovate, take initiative, and shape a forward-looking strategic vision. In this case, activism becomes an invitation to lead boldly, not a warning to retreat.

In both cases, stakeholder activism does not drive CEOs on its own—it amplifies the signals already coming from performance metrics. It turns good performance into a reason to push harder, and poor performance into a stronger cue to course-correct.

In short, stakeholder activism magnifies the CEO’s motivational response to performance. It’s not just about pressure—it’s about how that pressure aligns with the firm’s trajectory and shapes what kind of leadership feels right for the moment.

3. CEO Tenure

Not all CEOs respond to pressure in the same way—and one key reason lies in how long they’ve been in the job. We suggest that CEO tenure shapes how much leaders adjust their motivational orientation in response to external signals. In short: the longer a CEO has held their position, the more stable—and less reactive—their regulatory focus tends to become.

Why is that? With time, seasoned CEOs often become less concerned with proving themselves. They’ve established their reputation, accumulated organizational knowledge, and earned the confidence of their board [19]. As a result, they feel less compelled to respond to each performance dip or external demand. This can bring a welcome sense of stability, but it also means they may become less attuned to changing conditions—and exhibit motivational rigidity.

This insulation works both ways. On the downside, long-tenured CEOs are less likely to experience the performance anxiety that can trigger a prevention focus. Weak results don’t rattle them as easily, and the threat of dismissal loses some of its bite. But on the upside, strong performance also has a muted effect: it’s less likely to energize them or push them into a bold, promotion-oriented stance²⁰. In other words, tenure dampens both extremes.

For boards and shareholders, this finding comes with an important message: tenure doesn’t just influence strategy through experience or expertise—it also shapes motivation. If external signals stop influencing a CEO’s mindset, that might require more deliberate interventions. Especially in times of change, boards may need to reassess whether the current leadership focus still fits the firm’s evolving needs.

This also raises broader questions about succession planning. As tenure increases, so does the risk of inertia. Organizations might benefit from regularly re-evaluating not only performance outcomes, but also whether the CEO’s motivational orientation still aligns with the company’s strategic direction.

Methodology and Empirical Evidence

To explore these relationships, we analyzed a longitudinal dataset of 594 CEOs from 377 publicly listed U.S. companies over a ten-year period. We employed computational text analysis to assess the regulatory focus expressed in CEO communications (e.g., shareholder letters), and linked these data with firm-level performance metrics, stakeholder activism indicators, and CEO tenure information.

The analysis revealed robust support for the hypothesis that relative firm performance influences CEO promotion focus, with additional evidence that stakeholder activism moderates this relationship. The dampening effect of CEO tenure was also supported, particularly in reducing responsiveness to performance-related cues.

The use of text analysis enabled us to go beyond subjective interpretations and extract patterns in how CEOs discuss their goals and priorities. By automatically capturing linguistic markers of promotion and prevention focus, we employed a scalable approach to studying executive motivation across a large sample.

These findings contribute to a growing body of research that examines how external conditions interact with executive psychology to shape strategic behavior. We also demonstrate the potential of integrating behavioral science with big data methodologies to generate actionable insights in organizational research.

Implications for Boards and Executive Teams

Our study’s findings offer several actionable insights for boards, investors, and executive teams who are involved in CEO selection, performance evaluation, and strategic alignment.

1. Contextualizing CEO Behavior

First, the study underscores the importance of understanding CEO behavior in context. Rather than attributing strategic decisions solely to personality traits or values, boards should assess how external signals—such as declining performance or rising activism—may be influencing a CEO’s motivations.

A CEO who appears risk-averse during a downturn may not be fundamentally conservative; they may be operating in a context that activates a prevention focus. Recognizing this allows boards to respond more constructively, for instance by providing reassurance, redefining performance narratives, or adjusting incentive structures.

It also highlights the importance of psychological diversity among executives. Just as firms value diversity in expertise or background, they may benefit from having leaders with different motivational orientations—or from ensuring that the environment supports the needed orientation at a given time.

2. Tailoring Oversight to Tenure

Second, the study suggests that CEO tenure matters for how boards should design oversight and support mechanisms. Newer CEOs might be more sensitive to external signals and may benefit from early guidance in framing strategic directions. By contrast, longer-tenured CEOs may require more deliberate engagement to recalibrate their focus if conditions shift.

This has implications for succession planning and leadership development. Boards might consider not only the experience and competence of CEO candidates but also how tenure-related factors could affect their adaptability and motivational orientation.

Organizations could also consider rotating advisory roles or introducing reverse mentoring programs to maintain motivational agility in senior leadership. Creating structured opportunities for feedback from employees, customers, or stakeholders may help long-tenured CEOs remain attuned to emerging strategic needs.

3. Designing Strategic Messaging and Governance Practices

The way strategic challenges are framed—as opportunities for growth or threats to be managed—can influence a CEO’s regulatory focus. Boards, top management teams, and other key stakeholders can play a role in shaping these narratives through the language used in communications, the design of performance reviews, and the structuring of incentive systems.

For example, in periods of underperformance where growth is still needed, messaging that highlights recovery potential and innovation capacity may help support a promotion-oriented mindset, even in difficult contexts. Similarly, investor communications that emphasize progress and forward-looking goals may reinforce opportunity-seeking behavior.

Governance mechanisms such as quarterly strategy reviews or scenario planning exercises may also help balance promotion and prevention concerns. These tools can make room for both risk-taking and risk awareness, supporting more nuanced decision-making.

Conclusion

With our study we advance a more dynamic view of CEO motivation by demonstrating that CEOs’ regulatory focus is not fixed, but shaped by situational signals that reflect job demands. CEOs adjust their strategic orientation in response to performance outcomes, stakeholder expectations, and their stage of tenure. This perspective offers a more realistic and nuanced understanding of executive decision-making.

For those involved in corporate governance, this means taking a more context-sensitive approach to supporting and evaluating CEOs. By recognizing how situational factors influence regulatory focus, boards can better align leadership behavior with organizational needs—and take proactive steps to ensure that CEOs are motivated in ways that match strategic priorities.

A shift toward context-aware governance does not mean abandoning individual assessments of CEOs. Rather, it means enriching those assessments with an understanding of how leadership behavior emerges from the interplay between internal dispositions and external demands.

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