‘CEOs engage in unethical behavior’

 

The chief executive officers with a strong record in corporate social responsibility are more likely to engage in less ethical treatment further down the line, despite maintaining an appearance of morality, an organizational behavior expert from London Business School says.

New research from Margaret Ormiston, Assistant Professor of Organisational Behaviour, London Business School and her co-author Dr Elaine Wong, University of California, Riverside suggests that CEOs with a track record of taking care of their stakeholders are more likely to feel justified in breaking with that record at a later date because of a sense that they have accrued moral credits from their prior ethical behavior.

Dr Ormiston says: “CEOs with a strong track record in corporate social responsibility are more likely to think that they can behave in a socially undesirable way without fear of discrediting their image.

“This is much like someone who is a healthy eater for 11 months out of 12 and indulges during the holiday season. A generally healthy diet gives them confidence that they will not be discredited as an unhealthy person.”

CEOs for whom it is important to be seen as leading by moral example, are ironically even more likely to engage in unethical behavior than CEOs for whom moral identity is less important.

Employees who identify strongly with their leaders may also feel that the strong CSR programs set by management license the workforce to be less careful in their relationship with stakeholders.

Dr Ormiston takes the infamous example of Enron: “Prior to the Enron scandal, former CEO Kenneth Lay endowed chaired positions at universities and donated vast amounts of money to charity. Such behavior on the part of the leader builds his social responsibility credits, which may license him to commit socially irresponsible behavior in the future. In other words, top leaders may feel that when they have acquired moral credits through a CSR strategy that balances the needs of multiple stakeholders, they can then put forth a strategy that cuts corners or is potentially harmful to stakeholders.”

These results from the study suggest board of a company should closely monitor CEOs’ management of their firms’ varied stakeholders. Ironically, this is especially important after a particularly good year in managing the needs of these stakeholders.

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