CEOs and Corporate Social Responsibility: Doing Good Gets You Fired?

Recent data suggests a CEO's corporate social responsibility initiatives may be play a role in turnover.

Does a commitment to corporate social responsibility factor in to high rates of CEO dismissal?

Good data provides invaluable insights for leaders, but it’s often difficult to separate the wheat from the chaff when it comes to research – especially research about human behaviors. That’s why I tend to view research with a proverbial grain of salt when it makes broad generalizations in its conclusions.

The big “for instance” of the week for me is a study that claims CEOs who support corporate social responsibility initiatives in their companies have better job security than other CEOs if financial returns are good, but are more likely to get fired than other CEOs if financial returns are poor.

The message: Doing good is fine and dandy until profits start to drop. Then it will likely get you canned.

The greatest value from this research is in the reminder it sends to three critical groups responsible for corporate governance when considering corporate social responsibility.

The research was done by three business school professors – Tim Hubbard (Notre Dame), Dane Christensen (University of Oregon) and Scott Graffin (University of Georgia). It was first published online by the Strategic Management Journal back in March, but it made it to the publication’s print editions last fall. That’s why publications like The Wall Street Journal were writing about it recently.

The professors looked at CEO turnover from 2003-2008 at Fortune 500 companies. After eliminating CEOs who weren’t fired, they ended up evaluating 98 CEO dismissals at 90 different companies. (Here’s a link to the study if you want more information on their methodology).

I have no reason to question the rigor of the research. But I also know from experience that so many factors are at work within Fortune 500 companies that it’s extremely difficult to accurately connect cause and effect for something as complex as a CEO’s dismissal.

So, for me, the greatest value from this research isn’t found in its assurance of accuracy; it’s in the reminder it sends to three critical groups responsible for corporate governance when considering corporate social responsibility: Boards, investors and CEOs.

For boards and investors …

These are the folks who often clamor for actions and results. More and more, they are asking – in some cases demanding – that companies “do good” while doing business. But they also are responsible for ensuring positive financial returns.

The reminder to these folks is to provide long-term support that helps produce the right long-term results you want to see.

For CEOs …

I’ll broaden this group to all high-level leaders within a company, which would include everyone in the C-suite at all companies and those a level or two down at many companies. To those leaders, the reminder is this: There’s never a right time to do the wrong thing.

Even if the research is partially true, it shouldn’t influence leaders when it comes to making decisions. A CEO (or any other leader) should never let saving his or her job in tough times get in the way of doing the right thing. Each initiative should be evaluated on its merits. Most business decisions of any significance come with some risks. But personal job security isn’t a risk a leader should put on the table during the decision-making process.

CEOs and other decision-makers need the support of their boards and shareholders, but courageous leaders understand there are times when they have to put their job on the line, standing firm in their commitment to what’s right for the long-term when others are blown here and there by the winds of short-sightedness.

 

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