Report from the Research Frontier: November 2019

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New findings: Make your case by emphasizing company values; and local ties make sustainable leaders

Every month, researchers publish dozens of articles on business sustainability. NBS highlights insights at the frontier of knowledge. See all monthly highlights.

Make Your Case by Emphasizing Company Values

It’s not all about the business case. As an advocate for sustainability action, you can have more impact with moral arguments than with economic ones — as long as you emphasize the link to company values.

A sample argument might be: “Our organization should commit to reducing carbon emissions, because our mission statement says that we work for a healthier society.”

When employees use moral language that fits with the organization’s mission, supervisors are more likely to devote attention, time, money and other resources to the issue.

Moral language works because it triggers feelings of guilt, reported researchers David Mayer, Madeleine Ong, Scott Sonenshein, and Sue Ashford. Making the link to organizational values is important because it provides strategic relevance and legitimacy.

The researchers studied the experience of workers who advocated for different social and environmental issues, and the managers who listened to them.

They found that moral arguments work even when an organization doesn’t closely follow its stated values; its ideals still have power.  

Read the article: Mayer, D.M., Ong, M., Sonenshein, S., & Ashford, S.J. 2019. The money or the morals? When moral language is more effective for selling social issues. Journal of Applied Psychology. (free access)

Local Ties Make Sustainable Leaders

“Buy local” should apply to your CEO as well.

CEOs working near their birthplace are more likely than non-local CEOs to prioritize long-term goals such as sustainability. Their firms are more socially responsible, pay more corporate tax to the home state, and are less likely to cut R&D investments for short-term profits.

Finally, firms with local CEOs see better financial performance and enjoy higher valuation. 

Researchers Shufang Lai, Zengquan Li, and Yong George Yang studied S&P 1500 firms from 1992-2016. They defined “local” CEOs as those working in the U.S. state in which they were born.

Why do local CEOs have a long-term focus? The researchers suggest that most people are deeply attached to their birthplace and want to maintain a good reputation there. Non-local CEOs can boost a firm’s short-term performance and move away before the impacts of their short-term decisions appear; local CEOs are less likely to take that option.

Boards often try to get CEOs to prioritize long-term results through incentives such as equity ownership (e.g. long-term stock options). The researchers found that hiring a local CEO is just as effective, as measured by firm financial performance.

These findings send a clear message on hiring, the researchers write. Hiring a local CEO benefits the community and long-term shareholders. And, despite their superior results, local CEOs also receive lower compensation than non-local CEOs.

Read the article: Lai, S., Li, Z., & Yang, Y.G.  2019. East, west, home’s best: Do local CEOs behave less myopically? The Accounting Review (free access with registration)

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