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Bolstering Managers’ Resistance to Temptation via the Firm’s Commitment to Corporate Social Responsibility

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Abstract

Behavioral ethics research has focused predominantly on how the attributes of individuals influence their ethicality. Relatively neglected has been how macro-level factors such as the behavior of firms influence members’ ethicality. Researchers have noted specifically that we know little about how a firm’s CSR influences members’ behaviors. We seek to better merge these literatures and gain a deeper understanding of the role macro-level influences have on manager’s ethicality. Based on agency theory and social identity theory, we hypothesize that a company’s commitment to CSR shifts managers’ focus away from self-interests toward the interests of the firm, bolstering resistance to temptation. We propose this occurs through self-categorization and collective identification processes. We conduct a 2 × 2 factorial experiment in which managers make expense decisions for a company with commitment to CSR either present or absent, and temptation either present or absent. Results indicate that under temptation, managers make decisions consistent with self-interest. More importantly, we find when commitment to CSR is present, managers are more likely to make ethical decisions in the presence of temptation. Overall, this research highlights the interactive role of two key contextual factors—temptation and firm CSR commitment—in influencing managers’ ethical decisions. While limited research has highlighted the positive effects that a firm’s CSR has on its employees’ attitudes, the current results demonstrate CSR’s effects on ethical behavior and imply that through conducting and communicating its CSR efforts internally, firms can in part limit the deleterious effects of temptation on managers’ decisions.

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Notes

  1. The importance of CSR is illustrated by Corporate Responsibility (2016) and Forbes (2016) magazines’ annual global rankings of the world’s largest companies according to how well they serve stakeholder interests and conform to socially responsible business practices.

  2. The opposite also appears to occur. While not specific to CSR, research does show that unethical environments in general contribute to members’ illegal and unethical activity (e.g., Arbogast 2008; Lewis 2009).

  3. During the instrument development phase, we interviewed financial managers of Fortune 500 companies who noted that they regularly rely on operating managers to make expense estimates.

  4. The managing director of an executive search firm recommended the bonus percentages used in the no temptation and temptation conditions based on their understanding of firm averages.

  5. Prior to hypothesis testing we assessed the distribution of the dependent variable. The Shapiro–Wilk test for normality indicates that the reported expense amounts for each of the four conditions are not normally distributed (all p < 0.008). In addition, as shown in Table 1, the standard deviations of the reported expense amounts are quite high. Thus, consistent with prior research (e.g., Boylan and Sprinkle 2001; Hutton et al. 2013), we conducted our analyses using the ranks of managers’ expense recommendations as the dependent variable instead of the reported expense amounts. This is because since the reported expense amounts are not normally distributed, it would violate a key ANOVA assumption. Accordingly, an ANCOVA using a rank transformation of the reported expense amounts is likely to be more efficient, powerful, and more theoretically appropriate than an ANCOVA conducted using the non-ranked reported expense amounts (Conover and Iman 1982). Analyses conducted using the non-ranked reported expense amounts yield results that are qualitatively similar to those reported in the paper.

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Author information

Authors and Affiliations

  1. School of Business Administration, University of Vermont, Burlington, VT, USA

    Cathy A. Beaudoin

  2. School of Business, Wake Forest University, Winston-Salem, NC, USA

    Anna M. Cianci

  3. Tylee Wilson Chair of Business Ethics, Center for Leadership and Character, School of Business, Wake Forest University, Winston-Salem, NC, USA

    Sean T. Hannah

  4. Department of Accounting and MIS, Alfred Lerner College of Business and Economics, University of Delaware, Newark, DE, USA

    George T. Tsakumis

Authors
  1. Cathy A. Beaudoin
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  2. Anna M. Cianci
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  3. Sean T. Hannah
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  4. George T. Tsakumis
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Correspondence to Anna M. Cianci.

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Conflict of interest

The authors declare that they have no conflict of interest.

Human and Animal Rights

All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.

Informed Consent

Informed consent was obtained from all individual participants included in the study.

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We gratefully acknowledge the research support provided by the Institute of Managment Accountants and the School of Business at Wake Forest University.

Cathy A. Beaudoin is retired.

Appendices

Appendix 1: Company Overview and Schedule of Consulting Projects

Panel A: Company Overview

Assume you manage a manufacturing plant for Health Care Products, Inc. (hereafter, “HCP”), a privately held company. HCP manufactures and sells various skin care products to wholesalers, retailers, and individuals throughout the USA. HCP plans to execute an initial public offering (IPO) of its stock within the next 3 months.

Panel B: Schedule of Consulting Projects

Service provided by:

Project status

Estimated contract amounta

ABC consulting

In early stages, estimated completion late Fall Year 2

$200,000

GPS consulting

In early stages, estimated completion late Fall Year 2

$400,000

CUFF advisory services

In early stages, estimated completion late Fall Year 2

$800,000

SGP LLP

In early stages, estimated completion late Fall Year 2

$1,600,000

  1. aParticipants are told that all projects were initiated and expected to be completed within 1 year. They are also told that they have not yet been billed for any of the above services

Appendix 2: Temptation-Absent and Temptation-Present Conditions

Panel A: Temptation-Absent Condition

Your compensation package for both Year 1 and Year 2 is composed of a base salary of $200,000 along with a guaranteed bonus of 25% of your base salary.

Expenses

(As of 12/31)

Current year

Next year

Year 1

Year 2

Current projected plant expenses

$77,100,000

$83,050,000

Panel B: Temptation-Present Condition

Bonus targets (based on expenses)a

(As of 12/31)

Current Year

Next Year

Year 1

Year 2

Actual plant expenses ≤ $80,100,000

40%

40%

Actual plant expenses > $80,100,000 and ≤ $83,000,000

20%

20%

Actual plant expenses > $83,000,000

0%

0%

Current projected plant expenses

$77,100,000

$83,050,000

  1. aParticipants are told that their bonus is calculated as a percentage of base salary ($200,000)

Appendix 3: CSR-Present and CSR-Absent Conditions

Panel A: CSR-Present Condition

HCP is well known throughout its industry, and the business world in general, as a socially responsible company. The company is committed to having a positive impact on both the society and the environment. For example, HCP purchases raw materials only from environmentally friendly suppliers. Also, the company frequently conducts social responsibility audits of its facilities to ensure the protection of workers’ civil rights and to oversee the ecological well-being of the organization. HCP takes corporate citizenship seriously and encourages all employees to do the same. You are aware that this commitment requires a continuous effort on your part to balance the financial needs of creditors and investors with the human needs of employees, customers, and the communities in which HCP operates.

Panel B: CSR-Absent Condition

HCP is dedicated to increasing market share and maximizing profits. Employees are focused on meeting earnings and growth targets.

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Beaudoin, C.A., Cianci, A.M., Hannah, S.T. et al. Bolstering Managers’ Resistance to Temptation via the Firm’s Commitment to Corporate Social Responsibility. J Bus Ethics 157, 303–318 (2019). https://doi.org/10.1007/s10551-018-3789-2

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