In recent years there has been a growing call for companies to have a clear societal purpose that goes beyond the traditional mantra of maximizing shareholder returns. It might stand to reason, therefore, that CEOs with a wider mindset might also be beneficial.

Recent research from Columbia Business School explores whether so-called prosocial CEOs do indeed have a beneficial impact on their workforce.

Thinking of others

In the world of corporate leadership, CEOs who care about their employees tend to boost motivation but often hesitate to cut jobs. This study dives into the relationship between these CEOs and their companies during tough times when layoffs are needed.

What the researchers find is that when industries face challenges like increased competition from abroad, prosocial CEOs (those who prioritize employee well-being) may find themselves on shaky ground. They’re more likely to lose their jobs and be replaced by CEOs who are less focused on employee welfare.

But for the prosocial CEOs who manage to hold onto their positions, there’s a twist. They get bigger bonuses tied to performance. This means that even CEOs who care about their employees might feel pressured to downsize their workforce during tough times, contrary to their natural instincts.

In essence, this research shows that when foreign competition shakes things up in a company, it doesn’t just affect the business side of things. It also changes how the CEO thinks and acts, sometimes pushing them to make tough decisions that go against their usual approach.