Why Goody-Goody Companies Go Bad

A new study finds that acts of social responsibility can go hand-in-hand with corporate indiscretions.

In the business world, social responsibility may be a double-edged sword. According to a study published in the winter issue of Personel Psychology, when companies go beyond what's required of them by law in order to provide some sort of social good--through philanthropy or community relations or environmental efforts--it can spur irresponsible behavior later.

The study, from the London Business School and the University of California, Riverside, looked at corporate social responsibility from the CEOs of 49 companies on the 2002 Fortune 500 list. It found that after engaging in socially responsible behaviors, companies are more likely to act unethically in the future, because corporate leaders feel that they've accumulated "moral credits" by doing good deeds.

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This is especially the case if the company's CEO has "high moral identity symbolization," which is when a person presents him or herself to the world as moral to be seen in a more positive light. "In other words, these leaders will perceive that their past symbolic gestures of morality have bolstered their moral credits," the researchers write.

The study analyzes a small subset of companies, but the researchers estimate that for every five socially responsible steps that a corporation takes, it tends to commit one irresponsible act. For instance, Enron was a major philanthropic supporter in Houston, donating heavily to the arts and scholarship funds, but also engaged in fraudulent accounting that cost its shareholders billions of dollars. When it comes to companies dishing out philanthropic favors, there can be too much of a good thing, apparently.

[Image via Shutterstock]

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10 Comments

  • Lars Stalling

    The title of this article is misleading: these are not goody-goody companies going bad but instead baddy-baddy companies that are bad or socially irresponsible at heart who trick themselves and their customers into thinking they're good. CSR is hypocritical from the start - you only need a CSR department if you have something bad that doesn't go well with the society to whitewash - so the outcome of that study is far from surprising.

  • Bryan Matias

    What about companies who neglect social good? How often do they perform "bad deeds" compared to the socially conscious?

  • Charles

    The study, from the London Business School and the University of California, Riverside, looked at corporate social responsibility from the CEOs of 49 companies on the 2002 Fortune 500 list. It found that after engaging in socially responsible behaviors, companies are more likely to act unethically in the future, because corporate leaders feel that they've accumulated "moral credits" by doing good deeds.

  • Waqas

    This is especially the case if the company's CEO has "high moral identity symbolization"

  • Charles

    This is especially the case if the company's CEO has "high moral identity symbolization," which is when a person presents him or herself to the world as moral to be seen in a more positive light. "In other words, these leaders will perceive that their past symbolic gestures of morality have bolstered their moral credits," the researchers write.

  • Charles

    In other words, these leaders will perceive that their past symbolic gestures of morality have bolstered their moral credits

  • Charles

    companies are more likely to act unethically in the future, because corporate leaders feel that they've accumulated "moral credits" by doing good deeds.