By Daniel Coats ’15,’18
Does it matter if a company’s CEO is involved in social responsibility, such as sitting on philanthropic boards? Yes, according to research conducted by Cal State Fullerton Assistant Accounting Professor Zhejia Ling.
As co-author, Ling examined this topic in a forthcoming study that will appear in the Review of Accounting Studies, an A+ ranked journal. The study discovered that executives engaging in “prosocial” behavior – that is, supporting philanthropic organizations or similar activities that help others – are more likely to make corporate decisions that benefit their companies and increase corporate value.
“CEOs make decisions that have positive impacts on different aspects of the company, which include decreased employee turnover, higher customer satisfaction and more socially responsible activities,” says Ling. “This eventually translates to higher value and lower risk for the firm.”
Ling explains that being prosocial is more than just a set of behaviors at a particular time. “It is part of who a person is. It is an innate personal trait developed as early as childhood and built over time,” she says. “Thus, the question isn’t so much how a CEO can become prosocial but how organizations can select executives who are prosocial.”
A common sign of a prosocial CEO is one who serves on one or more boards of directors of philanthropic or charitable organizations, which can include humanitarian entities, community organizations or educational institutions. When executives devote some time out of their busy schedules to help direct a charitable organization, it means that their philanthropic emphasis is significant.
While determining whether an organization is led by prosocial executives might seem to be subjective, Ling and her fellow researchers used quantifiable data from BoardEx, which maintains profiles of thousands of corporations and their leaders.
Using data on involvement in foundations and charities, the researchers looked at the individual, rather than the organization, in assessing prosociality. If the CEO was involved in at least one philanthropic organization, they were labeled prosocial.
A Prosocial Emphasis – Through Thick and Thin
Whether in good times or bad, prosocial CEOs are likely to reflect an inclusive emphasis that benefits employees, the community and other stakeholders, according to Ling’s research.
For instance, prosocial CEOs are less likely to both singularly take credit for corporate successes or to singularly assign blame to others for failures, recognizing instead the shared efforts involved across an organization and its sphere.
In short, for the prosocial CEO, leadership is less about the individual and more about stewardship.
Ling co-authored the study with Accounting Professor Mei Feng of the University of Pittsburgh, University of Washington Professor Weili Ge, and Singapore Management University Professor Wei Ting Loh.
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