How CEO hubris affects corporate social (ir)responsibility. (2015)

“CEO hubris leads to a lower level of company participation in socially responsible activities and a higher level of participation in socially irresponsible ones.”

Yi Tang, Hong Kong Polytechnic University; Cuili Qian, City University of Hong Kong; Guoli Chen, INSEAD, Singapore; Rui Shen, Nanyang Technological University, Singapore.
Strategic Management Journal 2015, 36: 1338–1357.

“The depth of a firm’s commitment to CSR largely depends on management foreseeing situations where stakeholder cooperation might be necessary, regardless of the firm’s short-term prospects.

“For example, a company that has helped build a school in an impoverished community may meet less resistance if it attempts to place a potentially noisy factory in that community later on.

“This particular competency has more to do with personality than with core business skills. Research shows that this is one of the blind spots common to hubristic or overconfident personalities. As a result, firms led by overconfident CEOs tend to shortchange CSR participation.

“The researchers reviewed media coverage of 464 CEOs and noted how often words such as “confident”, “overconfident”, “optimistic” or “optimism” were used to describe them, as opposed to words suggesting the opposite, e.g. “reliable”, “cautious”, “conservative”, and “practical”. Based on this, we were able to calculate a “hubris score” for each CEO, which we compared to CSR ratings information for his or her company.

“The results showed that all things being equal, CEO hubris leads to a lower level of company participation in socially responsible activities and a higher level of participation in socially irresponsible ones.”

From the review in Insead Knowledge

Access the full paper here: How CEO hubris affects corporate social (ir)responsibility.

Read the review here: The Societal Costs of CEO Overconfidence