Imagine that while waiting in line at Starbucks for your tall extra dry half-caff non-fat cappuccino with two Splenda, you notice that the person in front of you drops a dollar. In response, you pick up the dollar, give it back to the person, and give yourself a gold star. The next morning, while waiting for your skinny vanilla latte with no whip, the person again drops a dollar, but instead of returning it, you keep it, since you filled your moral quota for the week the day before. In other words, being morally responsible on Monday gives you license to act immoral on Tuesday. This is what Margaret E. Ormiston of the London Business School & Elaine M. Wong of the University of California at Riverside found, but the venue was Fortune 500 companies instead of coffee shops. Specifically, a firm’s past corporate social responsibility was positively related to future corporate social irresponsibility. Further, the more moral a CEO appears in public, the stronger this relationship is.
In their study, Ormiston & Wong examined 49 companies from the 2002 edition of the Fortune 500, and the data was obtained from a previous study that had examined the relationship between CEO characteristics, management team processes, and firm performance. Kinder, Lydenberg, Domini Inc.’s social ratings scale served as the measure of corporate social responsibility and corporate social irresponsibility. This ratings scale looks at behaviors within the domains of community relations, diversity, employee relations, environment, product, corporate governance, and human rights. Ratings by research assistants based on publicly available information about the CEO’s behavior served as the indicator of moral behavior. The behavior of the CEO was rated according to items such as “Is giving, generous towards others,” “Behaves in a sympathetic and considerate manner,” and “Makes moral judgments; judges self and others in terms of right and wrong.”