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Why Goody-Goody Companies Go Bad

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

Why Goody-Goody Companies Go Bad

[Image via Shutterstock]

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.

Image via Shutterstock

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.