This week’s articles look at fostering ethical practices within companies and the resulting impact on profits and employee behaviour.
CSR reputation and firm performance
Many countries have regulations that require firms to engage in minimum levels of corporate social (CS) activities in areas such as the environment and social welfare. In this paper, the authors argue that changes in a firm’s compliance with CS regulations are reflected in its reputation for corporate social responsibility (CSR), which affects the firm’s performance.
The performance impacts depend on whether the firm’s CSR reputation in the current and prior periods is positive (i.e., the firm exceeds CS regulations), neutral (the firm meets CS regulations), or negative (the firm fails to comply with CS regulations). Our theoretical framework draws on the reputation literature and on the concepts of recency bias, which weights the present more heavily than the past, and negativity bias, which weights negative assessments more heavily than neutral or positive assessments.
The authors test our hypotheses on a sample of 7317 banks over 1992–2007 where the authors compare a bank’s return on assets (ROA) with its current and prior compliance ratings under the U.S. Community Reinvestment Act. The authors find that changes in CSR reputation have predictable, asymmetric, and sizeable impacts on firm performance. For example, for an average bank with $1 billion in assets, gaining a positive CSR reputation translates into a rise in profits of 4.04%; gaining a negative CSR reputation results in a drop in profits of − 7.8%.
Stewart R. Miller, Lorraine Eden & Dan Li. 2020. CSR Reputation and Firm Performance: A Dynamic Approach.
Journal of Business Ethics, 163(3), 619–636.
Safety-related moral disengagement in response to job insecurity
The purpose of this study was to examine individual and organisational antecedents and consequences of safety-related moral disengagement. Using Conservation of Resources theory, social exchange theory, and psychological contract breach as a theoretical foundation, this study tested the proposition that higher job insecurity is associated with greater levels of subsequent safety-related moral disengagement, which in turn is related to reduced safety performance.
Moreover, the authors examined whether perceived organisational and supervisor support buffered or intensified the impact of job insecurity on moral disengagement. Using a two-wave lagged design, anonymous survey data collected from N = 389 working adults in the U.S. supported the hypothesised moderated mediation model. Specifically, the conditional indirect effects of job insecurity on safety performance via moral disengagement were intensified as levels of perceived organisational and supervisor support increased.
These results suggest that the threat of job insecurity may prompt employee moral disengagement; this effect is even stronger among employees who perceived higher levels of organisational and supervisor support. The authors interpret these counterintuitive findings in light of increasingly insecure contemporary work arrangements and how these may give rise to potentially unethical safety-related decision making and behaviour.
Tahira M. Probst, Laura Petitta, Claudio Barbaranelli and Christopher Austin. 2020. Safety-Related Moral Disengagement in Response to Job Insecurity: Counterintuitive Effects of Perceived Organizational and Supervisor Support.
Journal of Business Ethics, 162(2), 343–358.
Linking CSR, customer trust and customer loyalty
In an ever more transparent, digitalised, and connected environment, customers are increasingly pressuring brands to embrace genuine corporate social responsibility (CSR) practices and co-creation activities. While both CSR and co-creation are social and collaborative processes, there is still little research examining whether CSR can boost co-creation.
In addition, while previous research has mainly related co-creation to emotional outcomes (e.g., customer affective commitment), limited empirical research has related it to rational (e.g., customer trust) and behavioural outcomes (e.g., customer loyalty). To address these shortcomings in the literature, this paper examines the influence of CSR on customer loyalty, considering the mediating roles of co-creation and customer trust. It also investigates the influence of co-creation on customer trust.
The data were collected in Spain in late 2017 using an online survey, and the sample contained 1101 customers of health insurance services brands. Structural equation modelling was used to test the hypothesised relationships simultaneously. The results show that CSR influences customer loyalty both directly and indirectly through co-creation and customer trust.
However, the indirect impact is the stronger of the two, implying that embracing co-creation activities and developing customer trust can make it easier for CSR practices to enhance customer loyalty. In addition, co-creation has a direct effect on customer trust.
Oriol Iglesias, Stefan Markovic, Mehdi Bagherzadeh & Jatinder Jit Singh. 2020. Co-creation: A Key Link Between Corporate Social Responsibility, Customer Trust, and Customer Loyalty.
Journal of Business Ethics 163(1), 151–166.
Can we reduce lying?
We introduce several new variants of the dice experiment by Fischbacher and Föllmi-Heusi (Journal of the European Economic Association 11(3):525–547, 2013) to investigate measures to reduce lying.
Hypotheses on the relative performance of these treatments are derived from a straightforward theoretical model. In line with previous research, the authors find that groups of two subjects lied at least to the same extent as individuals—even in a novel treatment where the authors assigned to one subject the role of being the other’s monitor. However, the authors find that participants hardly lied if they do not benefit and only others do, even if they were in a reciprocal relationship.
Thus, the authors conclude that collaboration on lying mostly happens for personal gain. To mitigate selfish lying, an honesty oath which aims to increase moral awareness turned out to be effective.
Tobias Beck, Christoph Bühren, Björn Frank & Elina Khachatryan. 2020. Can Honesty Oaths, Peer Interaction, or Monitoring Mitigate Lying?
Journal of Business Ethics, 163(3), 467–484.
The value of an apology
In a crisis, managers are confronted with a dilemma between their ethical responsibility to respond to victims and their fiduciary responsibility to protect shareholder value.
In this study, the authors use a unique and comprehensive dataset of 223 non-financial crises between 1983 and 2013 to investigate how corporate apologies affect stock prices. Our empirical evidence shows that the stock price response from apologising depends on the firm’s level of responsibility for the crisis.
The authors find that to protect shareholder value, management needs to match its formal response strategy with the degree of its responsibility for the crisis. Further, failing to match the proper response is harmful to shareholders: Both apologising when the firm is not directly responsible for the crisis and failing to apologise when the firm is directly responsible reduce shareholder wealth.
However, apologising for a crisis when the firm is directly responsible mitigates losses to shareholder value that arise because of the crisis, as does refraining from apologising when the firm is not directly responsible.
Marie Racine, Craig Wilson & Michael Wynes. 2020. The Value of Apology: How do Corporate Apologies Moderate the Stock Market Reaction to Non-Financial Corporate Crises?
Journal of Business Ethics, 163(3), 485–505.
Firm responses to mass outrage
When an employee’s off-duty conduct generates mass social media outrage, managers commonly respond by firing the employee. This, I argue, can be a mistake.
The thesis I defend is the following: the fact that a firing would occur in a mass social media outrage context brought about by the employee’s off-duty conduct generates a strong ethical reason weighing against the act. In particular, it contributes to the firing constituting an inappropriate act of blame.
Scholars who caution against firing an employee for off-duty conduct have thus far focused primarily on due process related issues or legal concerns pertaining to free speech, lifestyle discrimination, and employment at-will. However, these concerns amount to only a partial, and contingent, diagnosis of what is at issue.
I argue that even when due process considerations are met, firings in these contexts can be unjustified. Moreover, even if a business is not concerned with the unethical conduct per se, but is rather strictly concerned with PR, the argument I advance nevertheless provides one important ethical reason that counts against firings in mass social media outrage contexts. Given that managers are often under significant pressure to respond swiftly in cases where an employee is at the centre of mass social media outrage, it is especially important that scholars begin to clarify the normative issues.
This article builds on the burgeoning philosophical literature on the ethics of blame and provides a novel account of a distinctive ethical concern that arises with firings in mass social media outrage contexts.