Our articles this week focus on how much the individual actions of CEOs affect the uptake of CSR practices.

The acquisitive nature of extraverted CEOs 
This study examines how extraversion, a personality trait that signifies more or less positive affect, assertive behaviour, decisive thinking, and desires for social engagement, influences chief executive officers’ (CEOs’) decisions and the ensuing strategic behaviour of firms.

Using a novel linguistic technique to assess personality from unscripted text spoken by 2,381 CEOs of S&P 1500 firms over ten years, the authors show that CEOs’ extraversion influences the merger and acquisition (M&A) behaviour of firms above and beyond other well-established personality traits. The authors find that extraverted CEOs are more likely to engage in acquisitions, and to conduct larger ones, than other CEOs and that these effects are partially explained by their higher representation on boards of other firms.

Moreover, the authors find that the acquisitive nature of extraverted CEOs reveals itself particularly in so-called “weaker” situations, in which CEOs enjoy considerable discretion to behave in ways akin to their personality traits. Subsequent analyses show that extraverted CEOs are also more likely than other CEOs to succeed in M&As, as reflected by stronger abnormal returns following acquisition announcements.

Read this Open Access article for free online

Shavin Malhotra, Taco H. Reus, Peng Cheng Zhu, Erik M. Roelofsen. 2018. The acquisitive nature of extraverted CEOs.
Administrative Science Qtly, 63(2), 370-408.


Hubris and unethical decision making: The tragedy of the uncommon
The research theorises how hubris impacts ethical decision making and develops empirical evidence that earnings manipulation is more likely at firms led by CEOs influenced by hubris. The theory posits that hubris impairs moral awareness by causing decision makers to ignore external factors that otherwise drive such awareness.

Additionally, these individuals apply a flawed subjective assessment of the decision they face which further impairs moral awareness. The predicted result is that hubris leads managers to invoke an amoral decision process which causes a higher incidence of unethical behaviour among these individuals. An empirical study investigates the relationship between CEO hubris and the unethical practice of earnings manipulation.

This study finds a significant correlation between CEO hubris and earnings manipulation at the firms they lead, an outcome broadly consistent with the theory developed.

Joseph McManus. 2018. Hubris and Unethical Decision Making: The Tragedy of the Uncommon. 
Journal of Business Ethics, 149(1), 169–185.


Corporate social irresponsibility and executive succession 
This study contributes to the corporate social responsibility, stakeholder theory, and executive succession literature by examining the effect of corporate social irresponsibility (CSiR) on strategic leadership turnover. The authors theorise that firms’ CSiR increases the likelihood of executive turnover.

The investigators also investigate the nature of succession (non-voluntary or voluntary succession) and successor origin (internal candidate or external candidate) following CSiR. The authors further examine how the CSiR–CEO succession relationship is moderated by firm visibility to stakeholders and industry dynamism.

Our results, based on a dataset of 248 U.S. public firms between 2001 and 2008, provide evidence that firms’ CSiR affects what is conventionally seen as primarily a market-driven decision on executive turnover, especially when firms operate in a more dynamic industry. Research contributions and implications are discussed.

Shih-Chi Chiu and Mark Sharfman. 2018. Corporate Social Irresponsibility and Executive Succession: An Empirical Examination. 
Journal of Business Ethics, 149(3), 707–723.


Ethical decision-making profiles of U.S. CEOs in luxury goods organisations  
This study involved using a mixed method research design to examine the moral philosophy difference between the ethical decision-making process of CEOs in U.S.-led and non-U.S.-led within the luxury goods industry. The study employed a MANOVA to compare the ethical profiles between the two leader types (US and non-US led) and a phenomenological qualitative process to locate themes that give indication as to the compatibility of the luxury strategy values and practices with the principles and concepts of responsible leadership and conscious capitalism.

As the luxury goods industry is facing the first slowdown since 2000, pressure to achieve sales targets in the U.S. to make up for losses in other markets will place these CEOs under extreme pressure from their headquarters. These leaders must possess the ethical decision-making capability to balance legal and moral dilemmas unique to multinational luxury goods organisations while delivering business results in a challenging environment.

Results of the study show no evidence of difference in the ethical decision-making profiles between the two groups of leaders. The themes and emergent findings resulting from the qualitative analysis indicate a profound incompatibility between the values informing decision-makers using the luxury strategy and those employed by leaders operating within the principles and parameters of responsible leadership and conscious capitalism.

Recommendations for future research include replicating the study with a larger sample, within a different geographic region or comparing leaders using the luxury strategy to those using conscious capitalism.

Jacqueline C. Wisler. 2018. U.S. CEOs of SBUs in Luxury Goods Organizations: A Mixed Methods Comparison of Ethical Decision-Making Profiles. 
Journal of Business Ethics, 149(2), 443–518.


Managerial compensation and firm value under socially responsible investors
Shareholders with standard monetary preferences will give a manager incentives to increase firm profits, which can be achieved with equity grants.

When shareholders are socially responsible, in the sense that they also value corporate social performance, it is not clear which incentives the manager should receive. Yet, in a standard principal–agent model, the authors show that the optimal contract is surprisingly simple: it consists in giving equity holdings to the manager. This is notably because the stock price will incorporate expected profits as well as the social performance of the firm, to the extent that it is valued by shareholders. Consequently, equity holdings give the manager incentives to jointly maximise the profits and the social performance of the firm according to shareholders’ preferences.

To facilitate alignment of interests, more socially responsible firms will optimally hire more socially responsible managers. The authors conclude that neither the shareholder primacy model nor equity-based managerial compensation is necessarily inconsistent with the attainment of social objectives.

Pierre Chaigneau. 2018. Managerial Compensation and Firm Value in the Presence of Socially Responsible Investors. 
Journal of Business Ethics, 149(3), 747–768.


The effect of board capital and CEO power on CSR disclosures 
This study examines the effect of directors’ human and social capital (i.e. board capital) on the level of corporate social responsibility (CSR) disclosures by drawing on insights from a resource-based view. It also investigates the effect of chief executive officer (CEO) power on this relationship.

Data were obtained from annual reports of companies listed on the Dhaka Stock Exchange in Bangladesh from 2005 to 2013. The authors employ outside directors’ experiences and expertise as a proxy for board capital and measure CEO power using a ‘power index’ that comprises CEO duality, ownership, tenure and family CEO status.

Results show that board capital is positively associated with CSR disclosure levels; however, CEO power is negatively associated with CSR disclosures and reduces the effect of board capital on CSR disclosures. Thus, the authors conclude that although board capital can improve CSR practices, CEO power can also inhibit these practices.

Mohammad Badrul Muttakin, Arifur Khan & Dessalegn Getie Mihret. 2018. The Effect of Board Capital and CEO Power on Corporate Social Responsibility Disclosures. 
Journal of Business Ethics, 150(1), 41–56.


Board and CSR Assurance in China 
This paper investigates the association between board characteristics and the company’s corporate social responsibility (CSR) assurance decision in China. By examining 2054 firm-years of Chinese listed companies with CSR reports from 2008 to 2012, the authors find that firms with a large board size, more female directors, and separation of CEO and chairman positions are more likely to engage in CSR assurance.

Gender diversity also influences the CSR assurance provider choice. However, board independence and overseas background of the CEO do not affect the CSR assurance decision. Inconsistent with this prediction, firms with foreign directors are less likely to engage in voluntary CSR assurance.

In summary, this research provides in-depth insights into the determinants of Chinese firms’ voluntary CSR assurance.

Lin Liao, Teng (Philip) Lin and Yuyu Zhang. 2018. Corporate Board and Corporate Social Responsibility Assurance: Evidence from China.
Journal of Business Ethics, 150(1), 211–225.