2013-12-04

Does A Company's Social Responsibility Policy Increase The Risk Of Being Evil?

When we exercise, we sometimes overeat later—i.e. the "good" action prompts the "bad." This effect also applies to companies, CEOs, and their likelihood to engage in unethical behavior. No one is safe.

Imagining yourself as "doing good" can sometimes lead to bad things. You eat more at Thanksgiving because you went to the gym in the morning. The "good" action somehow licenses the "bad" action, because you have a self-image as a healthy person. Similarly, you may commit unethical acts precisely because you consider yourself an upstanding person. You do the heinous thing because, subconsciously or not, you have the halo-credits in the bank.

Psychologists call this "moral licensing" or "self-licensing," and apparently it applies as much to corporate behavior as it does to eating. A new study finds that CEOs are more likely to do bad things when they've just unveiled a corporate responsibility initiative. In other words, those leaders that look best may be the ones we should be most wary about.

Margaret Ormiston, at the London Business School, and Elaine Wong, at the University of California, Riverside, analyzed thousands of public documents related to 49 public companies and dated between 1996 and 2002. They performed a psychological analysis of each CEO using a standard technique and then looked at the corporate responsibility performance of each company using a trusted rating system. They find that "firms that engaged in prior socially responsible behavior are more likely to then engage in socially irresponsible behavior." Not only that, but CEOs with high "moral identity symbolization"—that is, CEOs who seem to be fair, kind, and compassionate—are more likely still to commit unethical acts.

Implementing a corporate responsibility program, the authors find, gives CEOs "moral credits" that allow them "to be less vigilant toward managing stakeholder needs or even engage in unethical behavior without discrediting themselves or their organization," the paper says. In addition, it says, "employees may feel licensed to engage in unethical behavior toward stakeholders because they have categorized their leader as part of their in-group and internalized their past [corporate responsibility] action."

In an interview, Ormiston says CEOs aren't necessarily to blame. Anyone can fall into a moral licensing trap, and do so unwittingly. But that makes the issue all the harder to deal with, as both "unethical" and "ethical" companies could be affected. "It is important to raise awareness of this effect with 'everyday' leaders and organizations," she says. "Corporate boards cannot allow CEOs to rest on their laurels. [They] need to closely monitor CEOs’ management of their firm’s varied stakeholders."

That is to say, even the best, most ethical CEOs can mess up and we all need to pay attention. Beware leaders who say they've got it all figured out. There could be a big corporate responsibility lapse around the corner.

[Image via Shutterstock]

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