The Fall of Icarus, Carlo Saraceni (c.1580-1620), Museo e Gallerie Nazionale di Capodimonte, Naples, Italy
Ideas for Leaders #273

CSR: Pride Comes Before a Fall

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Key Concept

CEOs with a strong record in corporate social responsibility (CSR) are more likely to engage in less ethical behaviour further down the line, despite maintaining an appearance of morality. Leaders should, therefore, be aware of their propensity to fall from grace and boards should closely monitor their behaviour, especially if the CEO in question is currently ‘on a pedestal’, with recent CSR achievements to their name.

Idea Summary

Intuitively, one might assume that people who have ‘done good things’ and received recognition for their ethical stance would feel encouraged to continue in the same vein. But this research suggests that, when it comes to top business leaders, this simply isn’t the case.

The research finds that CEOs with a track record of ‘going the extra mile’ to take care of their stakeholders are, in fact, more likely to feel justified in breaking with that record at a later date. They do so because of a sense that they have accrued moral credits from their prior ethical behaviour.

This surprising finding comes from a detailed study into 49 Fortune 500 firms by Dr Margaret Ormiston, Assistant Professor of Organizational Behaviour at London Business School, and Dr Elaine Wong, Assistant Professor of Management at University of California, Riverside.

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

She continues, “We’re not talking about evil people here – we’re all vulnerable to this trap. Take people who eat healthily for 11 months of the year, but then over-indulge during the Christmas holiday season. Their generally healthy diet gives them confidence that they will not be discredited as unhealthy people.”

The research finds that leaders for whom it is important to be seen as leading by moral example are, ironically, even more likely to engage in unethical behaviour than those for whom moral identity is less important. The name The Reverend Paul Flowers springs immediately to mind. The former chairman of the Co-Operative Bank was a Methodist Minister of many years standing, and he led an organization proud of its ethical stance – before falling from office amid lurid claims of cocaine use and possession of child pornography, not to mention mere professional incompetence.

Dr Ormiston cites another infamous example in Enron’s Kenneth Lay. “Prior to the Enron scandal, former CEO Kenneth Lay endowed universities and donated vast amounts of money to charity. Such behaviour on the part of the leader builds his social responsibility credits, which may license him to commit socially irresponsible behaviour 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.”

It gets worse: the problem is catching. According to the research, employees who identify strongly with their leaders may also feel that the strong CSR programs set by management license them to be less careful in their relationship with stakeholders. Academics refer to this phenomenon as ‘vicarious moral licensing’. “An employee can observe their leaders or their company doing something laudable and, largely subconsciously, be more inclined to act questionably themselves,” says Dr Ormiston.

Business Application

Although organizations have invested considerable effort into understanding CSR, much less is known about corporate social irresponsibility (CSiR). Drawing on this research, however, they should now be aware that CSR in leaders is closely associated with subsequent CSiR, because the moral credits achieved through CSR often prompt leaders (and potentially workers) to engage in less ethical stakeholder treatment.

Leaders should also be aware that the more ‘being moral’ is expressed outwardly to the public through actions and behaviour, the stronger the likelihood of a subsequent CSR failure. Pride, it seems, is indeed the precursor to a fall.

Beyond raising leaders’ awareness of the issue, the research suggests that boards 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. In practice, measures could include paying close attention to goal-setting. As Dr Ormiston puts it, “Once a goal has been accomplished it doesn’t work as hard any more in positively influencing behaviour, so it’s important to raise the bar by setting new CSR targets.” 

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Source

Idea conceived

  • May 2013

Idea posted

  • November 2013

DOI number

10.13007/273

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