When Doing Good Ends Badly for CEOs
Published: October 17, 2017 / Author: Fox Business
DOW JONES NEWSWIRE:
CEOs beware: Being a do-gooder could get you fired.
Many corporate chieftains argue that companies shouldn’t only seek to be money-making enterprises; they should also be good corporate citizens. From Starbucks Corp. Chairman Howard Schultz to Unilever PLC Chief Executive Paul Polman, leaders variously promote efforts to reduce their company’s carbon footprints, work with sustainable suppliers and produce healthier or more eco-friendly products — both as a marketing tool and business model.
“My personal mission is to galvanize our company to be an effective force for good,” Mr. Polman says on his LinkedIn page.
But a new study shows that socially responsible initiatives can be a double-edged sword for CEOs, helping to shield them from being ousted during more prosperous times but increasing the likelihood they would be fired in bad times.
Examining the exits of Fortune 500 company bosses over several years, researchers found that those who heavily invested company resources in good corporate citizenry were 84% more likely to be fired amid sluggish financial results than CEOs at poor-performing companies that spent less on do-good initiatives.
On the flip side, spending on corporate social responsibility acted as a protective buffer for company chiefs who presided over robust profitability. They were 53% less likely to be ousted than other leaders of high-performing companies that didn’t invest so much in measures to bolster social welfare, according to the study, publish in the November issue of Strategic Management Journal.
Timothy Hubbard, an assistant professor at Notre Dame University’s Mendoza College of Business and one of the study’s authors, says the findings suggest that CEOs who pull off strong profits in a seemingly socially responsible way build up goodwill with their boards because they have managed to achieve two goals at once.
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