Does Partisanship Breed Misconduct?

Here’s a theory of corporate conduct that seems just too perfect for this year’s fraught political climate: what if companies are more likely to commit misconduct depending on the political fervor of their CEOs?

So says a fascinating bit of research from two business professors, who developed a way to measure the political enthusiasm of CEOs and then compared that enthusiasm against records of misconduct at the CEOs’ companies. 

They found that the more politically engaged the CEO was, the greater the chance that his or her company suffered incidents of misconduct — regardless of whether the CEO was liberal or conservative! The intensity of a CEO’s political partisanship correlated to misconduct, not the CEO’s specific political beliefs.

OK, that certainly explains a lot about Elon Musk and the numerous infractions at his companies Tesla, NeuraLink and SpaceX; but is any close observer of corporate leadership actually surprised by this? We shouldn’t be.

On the contrary, the two researchers (Thomas Fewer at Rutgers University and Murat Tarakci at Erasmus University in the Netherlands) stumbled across one version of a deep truth about good leadership and corporate culture that has been known for quite some time. Namely, when leaders lack humility — when they fall in love with their own sense of supremacy and self-righteousness — they tend to ignore the advice of others when deciding what to do. 

So of course a leader like that would barge into the political world with extreme and unapologetic conviction. By the same egotistical token, such a CEO is also more likely to barrel down any business path he or she believes best. And then we’re supposed to be surprised when leaders like that veer into corporate misconduct? Or that their terrible attitude spreads to others in the business, who behave the same way? 

No, not at all. This research confirms what ethics and compliance professionals should know already, so you can plan accordingly if you see leaders like that in your own organization.

‘Viewing Themselves as Morally Superior’

Let’s begin with a quick recap of the research Fewer and Tarakci actually did. Their complete paper will be published soon in the Academy of Management Journal, but even a pre-press version already posted on the Erasmus University website is plenty to get us started. 

They first studied the Fortune 500 firms from 2010 through 2018, and identified 365 firms that experienced at least one incident of misconduct in that time (defined as some federal, state, or local enforcement action that resulted in a monetary penalty of $5,000 or more). The median firm had four instances of misconduct.

Then Fewer and Tarakci developed their metric for CEOs’ political engagement. They tracked CEOs’ donations to political causes, and controlled for differences such as age, gender, years spent as CEO, the company’s financial performance, and other variables. They excluded CEOs’ activity on Twitter and social media, since younger CEOs tend to tweet more often than older ones.

Then they did something even more valuable: they studied how often CEOs used self-centered words such as “I,” “me” and “mine,” “noble,” and “righteous” on earnings calls. That gave Fewer and Tarakci a sense of how self-important the CEOs tended to hold themselves. 

When all was said and done, Fewer and Tarakci found that companies led by the most partisan CEOs (again, regardless of whether those CEOs were liberal or conservative) were nearly 50 percent more likely to engage in misconduct than companies led by their less partisan peers. 

OK, but why is that so? Fewer and Tarakci had a theory.

“We argue that partisan CEOs are subject to rationalizing their misconduct by disregarding stakeholders harmed by corporate misconduct and by viewing themselves and their organizations as morally superior,” the researchers wrote. “Politically partisan CEOs seem prone to hold themselves in high moral standard, which is positively associated with corporate misconduct.”

Humility and Ethical Leadership

Now let’s pivot to the qualities that make for a good CEO. I keep coming back to Good to Great, a book written by management guru Jim Collins in 2001 that explored why certain companies suddenly start to achieve outstanding performance. Collins gave great credit to the CEOs of those companies. He defined a leadership scale from 1 to 5, where the best executives were “Level 5 leaders.” He described them as follows: 

Level 5 leaders display a powerful mixture of personal humility and indomitable will. They’re incredibly ambitious, but their ambition is first and foremost for the cause, for the organization and its purpose, not themselves. While Level 5 leaders can come in many personality packages, they are often self-effacing, quiet, reserved, and even shy.

That connection between humility and good leadership has always stuck with me. A leader with humility seeks counsel from others, forges consensus, and always assumes that he or she might not be the smartest one in the room. Level 5 leaders might take longer to reach their decisions, but over time those decisions tend to be wiser. 

The picture of politically fervid CEOs painted by Fewer and Tarakci is anything but Level 5 leadership. Here’s another excerpt from their paper:

We propose that politically partisan CEOs will be more likely to rationalize engagement in misconduct as they: (1) fail to take others’ perspectives as to the harm from these actions, and (2) invoke a self-awarded moral superiority making them feel removed from any wrongdoing. These two features, we argue, could enable partisan CEOs to rationalize misconduct.

We’ve seen such behavior time and again in CEOs gone wild: they believe that they are always right, and therefore anything they do cannot be wrong. In my observation those CEOs also tend to be (a) men and (b) jerks, from “Chainsaw Al” Dunlap in the 1990s, to Bernie Ebbers at WorldCom in the 2000s (I personally heard him once say to a colleague, “If you’re too dumb to follow our finances that’s not my problem”) to Elon Musk today, with allegations of labor abuse at Tesla and Musk himself impregnating a senior executive at NeuraLink. 

Does every executive with strong political beliefs engage in misconduct? No, of course not; and some executives who have engaged in misconduct couldn’t care less about politics. 

But we should appreciate the glimpse into human nature that Fewer and Tarakci provide. A CEO’s political partisanship might correlate to greater chances of corporate misconduct, but both things flow from the same flawed wellspring: a lack of humility, and an abundance of self-righteousness.