CEOs motivated by their inherited altruism that is, they value altruism because of their cultural heritage are more likely to increase the CSR participation of their firms, leading to positive financial results.
How much do a CEO’s values influence firm activities? To answer this question, a team of researchers from Henley Business School and the University of Edinburgh explored the impact of a CEO’s altruism on a company’s corporate social responsibility performance.
Previous research has shown that cultural background strongly influences an individual’s values. Thus, the researchers focused on the inherited altruism of CEOs that is, altruism as a trait that emerges from CEOs’ cultural backgrounds rather than from other sources.
To gather the data for their study, the researchers drew on detailed immigration records available on Ancestry.com to link the last names of the CEOs in their sample to a country of origin. They then used survey data from the Global Preference Survey to gauge the prevalence of altruism in the cultures of each country of origin. The result: a measure of each CEO’s inherited altruism. The study’s final sample consisted of just over 1700 CEOs from 992 U.S. firms, whose ancestral origins were traced back to 29 countries.
With this information in hand, the research team retrieved data related to the CSR performance of the CEOs’ companies from ratings provided by the comprehensive survey of the Kinder, Lydenberg, and Domini (KLD) research group. The Henley Edinburg team focused on ratings in five categories: community, workforce diversity, employee relations, human rights, and environmental impact.
Analysis of the altruism data and CSR performance data was conclusive: Companies of CEOs whose ancestral countries of origin had stronger altruistic tendencies were more likely to have higher CSR performance ratings. Incorporating into the analyses individual and firm factors, such as CEO age, gender, and tenure, firm size, firm profitability, etc., as well as cultural factors, such as patience, trust, reciprocity, did not alter the relationship between inherited altruism and CSR.
What drives this relationship? Two opposing explanations were explored in the study. The first explanation was that a CEO’s altruism pushed him or her to engage the company in CSR activities whether or not they hurt the company’s financial results. The second was that CSR performance reflected good governance by the CEO, whose altruism inspired him or her to tend to the needs of all stakeholders, which in turn led to positive financial results.
Comparisons of the financial results of companies, the inherited altruism of CEOs, and firm CSR performance supported the “good governance” explanation. The researchers found no sign that higher CSR performance hurt financial results. They did find, on the contrary, that companies most at risk in times of financial crises or recessions (e.g., smaller-sized companies or those with poorer operational returns) were more likely to survive such downturns if their financial performance was strengthened by their CSR activities.
This study has several implications for practitioners. First, the results reinforce the argument that rather than sacrificing the bottom line, CSR activities enhance the financial performance of companies especially, as shown specifically here, for at-risk companies in periods of crises or recessions.
More salient to the study’s objectives is the proven link between CEO altruism (especially when such altruism reflects the CEO’s cultural heritage) and positive CSR performance. Such a link can inform a board’s decision in choosing a company’s next CEO. If the company’s culture and values include a commitment to social responsibility, or if the company is seeking to improve its CSR performance, the board will want to take into consideration the potential CEO’s altruistic tendencies and cultural heritage.
Miriam Marra’s profile at Henley Business School
https://www.icmacentre.ac.uk/people/miriam-marra
Jing Ruan’s profile at Henley Business School
https://www.icmacentre.ac.uk/people/jing-ruan
Lisa Schopohl’s profile at Henley Business School
https://www.icmacentre.ac.uk/people/dr-lisa-schopohl
Chao Yin’s profile at University of Edinburgh Business School
https://www.business-school.ed.ac.uk/staff/chao-yin
CEO Inherited Altruism and Firm Corporate Social Responsibility. Miriam Marra, Jing Ruan, Lisa Schopohl, Chao Yin. SSRN (December 20, 2023).
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