Dark side to CEOs with high integrity

While organizations naturally want to have principled leaders, researchers have found a surprising twist that chief executive officers (CEOs) with high integrity can have negative effects on the companies they lead.

According to the study, recently published in the European Journal of Marketing, CEOs who have high degrees of integrity tend to negatively influence each of the three core dimensions of entrepreneurial orientation – innovativeness, proactiveness and risk-taking – traits synonymous with successful leaders.

What the researchers say: “The influence of CEO integrity on corporate behavior is more profound than previously imagined,” said the study’s co-author. “We are not suggesting that integrity is bad; rather, we are cautioning CEOs to understand how their personality traits, even something positive like integrity, can be a double-edged sword and negatively impact the organization.”

CEOs who have high integrity are not, however, doomed to fail the authors explain. One of the most important things they can do to compensate is to surround themselves with a management team who are more creative, promotion-focused and willing to take risks.

According to the researchers, there are also things that companies can do to encourage those high integrity CEOs to step outside of their comfort zones.

“Board members can encourage their CEOs to be more proactive by focusing on their training and by creating incentive systems, such as high CEO equity-pay ratios, that motivate them to be proactive in their marketing choices,” they said. “Also, firms with high customer orientation face less challenges in motivating CEOs with high integrity to be innovative in their decision making. The culture of focusing on customer welfare puts high internal pressure on CEOs to be innovative, risk-taking and proactive.”

The study analyzed more than 200 Fortune 500 companies’ stakeholder newsletters, annual reports and fiscal activities.

So, what? I thoroughly enjoyed reading this study. If only to pick holes in it.

The idea that having integrity is a drawback for a CEO is novel. As is the one that a CEO must realize this infirmity and surround themselves with less scrupulous individuals. That sounds like something from Niccolò Machiavelli’s The Prince. There is, as far as I know, no research showing a connection between a low level of integrity and innovation or proactiveness.

Risk-taking and unethical behavior have both been shown to be connected with elevated levels of testosterone (in men and women). So perhaps there is a case to be made that integrity and risk-aversion are connected in some way.

There have been numerous studies connecting CEO risk-taking, unethical behavior and business collapse. Maybe a CEO with high integrity is a good idea after all.