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Are you an ethical CEO? Maybe not for long
New research suggests that moral business leaders are more likely to be unethical down the line.
November 24, 2013 3:10 by Muhammad Aldalou
Are you a CEO with high ethics and a strong record in corporate social responsibility (CSR)? If yes, new research suggests there’s a good chance that you’re likely to engage in less ethical treatment further down the line.
According to an organisational behaviour expert from London Business School (LBS), corporate leaders who have a track record of taking care of their shareholders are more likely to feel justified in breaking that record later.
Dr Margaret Ormiston, assistant professor of organisational behaviour at LBS, along with her co-author, Dr Elaine Wong at the University of California, Riverside, explain that this is because CEOs accrue moral credits from their prior ethical behaviour.
Dr Ormiston compares it to someone who eats healthily for 11 months of the year and indulges during the holiday season. In the same way that someone on a healthy diet is confident that they will not be labelled as an unhealthy person, leaders with a solid track record in CSR are more likely to think they can behave in a “socially undesirable” way without fear of discrediting their image.
The research also notes that CEOs for whom it is important to be seen as leading by moral example, are ironically even more likely to engage in unethical behaviour than CEOs for whom moral identity is less important.
Employees who identify strongly with their leaders may also feel that the strong CSR programmes set by management license the workforce to be less careful in their relationship with stakeholders.
Dr Ormiston takes the infamous example of Enron, explaining that prior to the Enron scandal, former CEO Kenneth Lay endowed chaired positions at 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,” she says.
The results of this research, according to the doctor, suggest that CEOs’ management of their firms’ varied stakeholders should be closely monitored by the board, especially after a particularly good year in managing the needs of these stakeholders.
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