UNH Today

Leading a company known for strong corporate social responsibility (CSR) practices does not necessarily equate to consistent ethical decision-making by its leader. In fact, researchers say some leaders could use a company’s past CSR practices as justification to make decisions that are viewed as unethical.

In a study recently published in the Asia Pacific Journal of Management, Jun Li, an associate professor of strategic management at the University of New Hampshire Peter T. Paul College of Business and Economics, and a team of researchers used survey results to study how CSR practices can influence the ethical decisions of business leaders.

The research was motivated by recent scandals in China involving leaders from companies like Luckin Coffee and Xiao Guan Tea, known for their CSR initiatives focusing on poverty alleviation and charitable donations but caught in financial fraud and false advertisement campaigns, respectively. Such instances prompted the researchers to investigate why leaders of socially responsible companies fall prey to unethical business decisions — such as fraud, lying or putting profits over people and social responsibility.

To better understand how leaders of companies with strong CSR practices might respond to situations with perceived ethical or unethical actions, the researchers had them complete a survey. 

Questions were presented in the following manner: “Many businesspeople have told us that firms and leaders often have various behavior that violates social norms. How likely are leaders similar to you to perform the following behavior?” One example scenario they were asked to react to involved a shop owner raising prices of essentials after a natural disaster.

Survey results confirmed what researchers had hypothesized going into the study. CSR practices can trigger in leaders either a moral licensing process — basing decisions on past good deeds — or a moral imagination process — basing decisions on how they impact others —  each of which exerts distinct influences on their ethical decision-making. Furthermore, the activation of either cognitive process depends on the leaders' inherent altruistic values — selflessness, and concern for the well-being of others.

"If a company leader is viewing their CSR practices through moral licensing they may think ‘I’ve been doing good deeds for over a decade, I guess it’s fine for me to do this one thing,’” Li says. “Leaders that think about their individual decisions in relation to society and the broader community will ask how their decision will impact, positively or negatively, different stakeholders beyond the business. That's demonstrating moral imagination."

The researchers found that leaders with strong altruistic values tend to make fewer unethical decisions due to the activation of moral imagination by CSR practices, while leaders with weaker altruistic values make more unethical decisions due to moral licensing triggered by CSR practices.

The primary survey researchers used in the study involved 115 Chinese executives from firms located in 10 provinces and municipalities, representing various industries such as manufacturing, information services, wholesale and retail trade, hotel and catering, and construction.

“What we see is that managers with different values and a different cognitive process toward the CSR practices of the firm could lead to different outcomes,” Li says. “I think, especially for reputable companies, that they need to be more careful in terms of choosing their leaders, so they can keep focusing on their desired causes, or even do more, instead of getting involved in scandal.”

Li says companies should consider implementing training programs that teach leaders about ethical decision-making and the importance of avoiding moral licensing. 

The research also suggests that companies establish CSR practices as an in-role job requirement, eliminating scenarios where such practices are discretionary while also creating a more ethical environment in the workplace.

Researchers say that future studies could focus on the role of organizational or national culture in influencing the link between firm CSR practices and leaders’ unethical decisions.