09 Nov. 2017 | Comments (0)
New research published in the Strategic Management Journal has made some waves (air waves, at least) with its key finding that “past investments in CSR appear to a) greatly increase the likelihood of CEO dismissal when financial performance is poor, and b) somewhat reduce the likelihood of CEO dismissal when financial performance is good. Thus, striving to deliver profits in a socially responsible manner may have both positive and negative personal consequences.” So, that clears things up.
Joking aside, given that CEO buy in continues to be a challenge for CSR executives, it’s smart to try to understand what the personal implications of CSR investment could be on a CEO. But “Higher Highs and Lower Lows: The Role of Corporate Social Responsibility in CEO Dismissal” is too simplistic, assuming that CSR investments don’t influence a company’s financial performance, but rather simply “build goodwill with [CEOs’] boards,” as Timothy Hubbard, an assistant professor at the University of Notre Dame's Mendoza College of Business and one of the study's authors, says.
This ignores the fact that smart, strategic CSR investments could be the very reason why companies have achieved strong financial performance and that poor CSR investments that aren’t aligned with the business strategy indicate a CEO who does not understand the modern business environment and the importance of social and environmental initiatives that deliver on the business strategy.
There’s a simple answer for CEOs: consult with the experts and understand how to invest in CSR properly, rather than giving it lip service in an effort to look the part.