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How the death of a senior leader affects a company’s CSR outlook

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After the sudden death of its CEO, Michael A. Kasper, last week (6 May), DuPage Medical Group has since announced it will be implementing an interim leadership transition plan, whereby the President and CFO will be co-CEOs.

Apart from bringing succession plans into disarray, and the loss of skills and social capital, the death of a senior leader also impacts the strategic and CSR activities of a firm, research has shown.

An INSEAD study has found that the death of a company director triggers the CEO’s awareness of their own mortality. This new-found awareness prompts them to re-prioritise their life, which subsequently leads to increase in the company’s CSR activities.

“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, 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).

It 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.

This analysis was a result of 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 such as:

  • Where the deceased director had been appointed during the CEO’s tenure – suggesting a closer connection between the CEO and the director;
  • When the death was sudden, as healthy CEOs are more likely to identify with peers who show no sign of illness or infirmity.

As such, 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.

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.

Photo / 123RF

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