CEOs are now more prominent than ever, with their actions and decisions receiving widespread attention, from Elon Musk’s tweets on Twitter to the job cuts at tech firms. These choices can have far-reaching consequences, impacting employees, customers, and society as a whole.
This has sparked new research from the University of Washington, which seeks to gain insight into the decision-making habits of CEOs. The study that CEOs who engage in prosocial behavior, which primarily focuses on helping others, tend to make decisions that are advantageous to people and enhance the value of the company.
In comparison to companies led by non-prosocial CEOs, those with prosocial CEOs exhibit lower executive-subordinate turnover, policies that are more favorable to employees, higher customer satisfaction, and greater involvement in socially responsible endeavors.
Prosocial behaviors
“CEOs are very visible, and they have interactions with a wide range of stakeholders,” the researchers explain. “Given their significant role and visibility in society, it’s important to look at and examine this issue. The prosocial tendency of CEOs has a big impact on their on-the-job decisions.”
The researchers determined prosocial CEOs by gathering data from BoardEx on their extracurricular activities, including their participation in foundations and charities. In the study, CEOs were deemed prosocial if they were involved with at least one organization that was categorized as charitable by the Internal Revenue Service.
“We considered how to measure a CEO as a person and not at the corporate level,” the authors explain. “We looked at CEOs’ involvement with charitable organizations, but then we needed to question their level of involvement. CEOs often serve as directors on charity boards, so that means their involvement is significant. They see this as a priority in their busy schedules. They devote time to it.”
The researchers validated the classification of prosocial and non-prosocial CEOs by analyzing the use of personal pronouns during conference calls. Previous research has shown that individuals who are more self-centered are more likely to take credit for positive outcomes and place blame on others for negative outcomes. In this study, CEOs classified as prosocial were less likely to use first-person singular pronouns when announcing positive news and the opposite was true for negative announcements.
Thinking of others
The study found that companies with prosocial CEOs have a lower likelihood of executive subordinates, such as CFOs and COOs, leaving the company. Additionally, these CEOs were more likely to implement policies that prioritize employee welfare.
The study measured a company’s overall corporate social responsibility score, which included initiatives related to community, diversity, employee relations, environmental policies, and product, and found that prosocial CEOs adopted more socially responsible policies. The study also showed that companies with prosocial CEOs had higher customer satisfaction.
Prosocial CEOs adopt a stewardship perspective, which prioritizes the well-being of others. As such, having a prosocial CEO can serve as a form of insurance policy as they are more likely to reduce risk through promoting goodwill among stakeholders.
“For example, if things go bad, maybe your supplier won’t abandon you and your customers will still buy your product,” the authors conclude. “You have this cushion against downward or negative shocks. A board of directors might want to consider individual characteristics, such as potential prosocial tendency, when making hiring decisions.”
