Objective This article examines the effects of organizational characteristics of parent companies in the electrical energy industry and state environmental policies on environmental pollution. By focusing on parent companies, the study draws attention to the managers who have the authority to make decisions that affect environmental pollution. Methods The study employs a cross‐sectional ordinary least squares regression design to examine three measurements of the dependent variable, SO2 emission rates. Results While controlling for several potential effects, the findings support all four hypotheses, which maintain that greater structural complexity, profits, dividend payments to increase shareholder value, and lower state‐level environmental standards resulted in greater environmental pollution. Conclusions The findings suggest that policymakers should focus on capital allocation decisions in parent companies and reexamine the neofederalist policies that provided states with greater autonomy for environmental regulation of corporations in the electrical energy sector.