A director’s death improves firm’s pro-social behaviour
When a company director dies, the impact extends beyond the loss of skills and social capital, affecting the strategic and CSR activities of the firm.
Middle East, Asia, Europe
24 April 2019
A new study has found that the death of a company director triggers CEOs’ awareness of their own mortality, prompting them to re-prioritise their life with wide-reaching implications for the firm, according to a new INSEAD study.
“The death of a colleague is a reminder to everyone in the workplace of the vicariousness of life and the inevitability of their own demise,” Guoli Chen, INSEAD Associate Professor of Strategy says, adding, “Death awareness, or mortality salience, is especially impactful when the death is sudden or of a perceivably-similar individual because it reinforces the distressing insight that ‘it could have been me’.”
In his paper, That Could Have Been Me: Director Deaths, CEO Mortality Salience and Corporate Pro-social Behaviour (co-authored with Crossland, C., and Huang, S.,Management Science, forthcoming), Chen provides evidence of a link between CEO mortality salience, triggered by the death of a board director at the same firm, and a subsequent increase in the firm’s corporate social responsibility including activities relating to community engagement, environmental opportunities, human rights, workforce diversity, employee relations and product safety and quality.
The research examined full data on CEO, director and governance characteristics from 89 public firms where a director had died in the years between 1990 and 2013. Information including that of asset growth and CSR activities were measured in the three to four years prior to and after the death, and the changes compared to those experienced by similar companies where no death had occurred.
As well as the increase in CSR, the study also found (and noted in an early version of the paper) that the deaths of company directors were also associated with:
• A decrease in CEOs’ public directorships
• An increase in CEOs’ non-profit directorships
• And a decrease in in firm assets growth
These findings were more prevalent in situations where the death was particularly salient for the CEO: where the deceased director had been appointed during the CEO’s tenure – suggesting a closer connection between the CEO and the director; and when the death was sudden, as healthy CEOs are more likely to identify with peers who show no sign of illness or infirmity.
Drawing from studies in the field of thanatology - death, dying, and bereavement – the research provides evidence of the way death acts as a cognitive trigger for the CEO resulting in both withdrawal and generative behaviours.
Chen explores how bereaved individuals may initially experience some degree of death anxiety, resulting in a decrease in motivation and disengagement from their careers and their previous life. CEOs experiencing death anxiety will often, at least in the short-term, be less committed to activities such as investment in assets growth.
Later, as they start to ponder their own demise, CEOs will behave in a way that may seem out of character. While traumatic, this period of grief can also be associated with a range of positive, self-transcendent cognitive responses which lead to generative behaviour. A CEO may express a desire to better appreciate the time they have left; re-evaluate the nature and purpose of their careers; search for greater personal meaning; and investigate ways of making a more lasting contribution to society such as directing firm’s resources towards greater levels of CSR and other prosocial behaviour.
“While society and the business community hope that firms and their leaders could be more responsible for their actions, our study provides an interesting perspective as to what happens when CEOs and managers have intrinsic motivation to realise that there are more important aspects to life than money,” says Chen.
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