The differential effects of CEO narcissism and hubris on corporate social responsibility

• Date: 01 May 2018
• Published date: 01 May 2018
• DOI: http://doi.org/10.1002/smj.2761

RESEARCH ARTICLE

The differential effects of CEO narcissism

and hubris on corporate social responsibility

Yi Tang

1

| Daniel Z. Mack

2

| Guoli Chen

3

1

Department of Management, School of Business,

Hong Kong Baptist University, Kowloon Tong,

Hong Kong

2

Discipline of Strategy and Organisation, Lee

Kong Chian School of Business, Singapore

Management University, Singapore, Singapore

3

INSEAD, Singapore, Singapore

Correspondence

Yi Tang, Department of Management, School of

Business, Hong Kong Baptist University, 34

Renfrew Road, Kowloon Tong, Kowloon, Hong

Kong.

Email: msytang@hkbu.edu.hk

Research Summary: While prior studies have predomi-

nantly shown that CEO narcissism and hubris exhibit

similar effects on various strategic decisions and out-

comes, this study aims to explore the mechanisms under-

lying how narcissistic versus hubristic CEOs affect their

firms differently. Specifically, we investigate how peer

influence moderates the CEO narcissism/hubris—

corporate social responsibility (CSR). With a sample of

S&P 1500 firms for 2003–2010, we find that the positive

relationship between CEO narcissism and CSR is

strengthened (weakened) when board-interlocked peer

firms invest less (more) intensively in CSR than a CEO’s

own firm; the negative relationship between CEO hubris

and CSR is strengthened when peer firms are engaged in

less CSR than a CEO’s own firm.

Managerial Summary: Some CEOs are more narcissistic

while others may be more hubristic, but these two groups

of CEOs hold different attitudes toward the extent to

which their firms should engage in corporate social

responsibility (CSR). Our findings with a large sample of

U.S. publically listed firms suggest that narcissistic CEOs

care more about CSR, but hubristic CEOs care less. Inter-

estingly, when narcissistic CEOs observe their peer firms

engaging in more or less CSR than their own firms, they

tend to respond in an opposite manner; in contrast,

hubristic CEOs will only engage in even less CSR when

their peers also do not emphasize CSR. Our findings

point to a fundamental difference between CEO narcis-

sism and hubris in terms of how they affect firms’CSR

decisions based on their social comparison with peer

firms.

Received: 12 May 2015 Revised: 16 October 2017 Accepted: 19 October 2017 Published on: 5 February 2018

DOI: 10.1002/smj.2761

1370 Copyright © 2017 John Wiley & Sons, Ltd. wileyonlinelibrary.com/journal/smj Strat Mgmt J. 2018;39:1370–1387.

KEYWORDS

board-interlocked peer firms, CEO narcissism, CEO

hubris, corporate social responsibility (CSR), S&P 1500

index firms

1|INTRODUCTION

Research on upper echelons theory has been paying increasing attention to CEO narcissism and

CEO hubris as part of an ongoing effort to shed light on executive decision-making processes

(e.g., Chatterjee & Hambrick, 2007, 2011; Hayward & Hambrick, 1997; Resick, Whitman, Weingar-

den, & Hiller, 2009). This stream of research has shown that, in general, CEO narcissism and CEO

hubris influence firm strategic choices and outcomes in similar ways. For instance, both narcissistic

CEOs and hubristic CEOs have a penchant for engaging in risky initiatives (Li & Tang, 2010),

large-scale acquisitions (Chatterjee & Hambrick, 2007; Malmendier & Tate, 2008; Roll, 1986),

intensive research and development (R&D) (Hirshleifer, Low, & Teoh, 2012), and firm innovation

(Galasso & Simcoe, 2011; Gerstner, Konig, Enders, & Hambrick, 2013).

Yet, recent empirical efforts have started documenting their opposing effects. For example, while

Petrenko, Aime, Ridge, and Hill (2016) found a positive effect of CEO narcissism on a firm’s

engagement in corporate social responsibility (CSR), Tang, Qian, Chen, and Shen (2015) reported a

negative effect of CEO hubris on CSR. These seemingly contradictory findings call for an examina-

tion of the differential operating mechanisms of CEO narcissism versus hubris at the macro-

organizational level. This study investigates the distinct operating mechanisms of CEO narcissism

and hubris leading to their differential effects in the CSR context by studying the moderating effect

of peer influence. Specifically, we examine how the CSR activities of board-interlocked peer firms

affect the CSR decisions of narcissistic and hubristic CEOs differently, through which we are able

to explore their individual operating mechanisms. Our efforts are worthwhile because, although

CEO narcissism and CEO hubris are two related executive psychological biases (Hiller & Hambrick,

2005), we know little about how and when they differ in their influence on strategic decisions at the

firm level.

This study begins by arguing the key difference between narcissistic CEOs and hubristic CEOs

is that narcissistic CEOs need constant applause and attention—what Kernberg (1975) called “nar-

cissistic supply”—to affirm their inflated positive self-view, whereas hubristic CEOs do not

(Kernberg, 1975; Li & Tang, 2010). Unlike other strategic decisions such as mergers and acquisi-

tions (M&As) or R&D, which are more economic-oriented, CSR comprises both economic and

social aspects. This dual nature of CSR thus allows us to tease out the different ways in which CEO

narcissism versus CEO hubris affect firm decisions on CSR engagement.

While the economic benefits of CSR for firms usually take time to materialize and are highly

uncertain in many circumstances (Margolis, Elfenbein, & Walsh, 2009), the benefits for executives

tend to be more straightforward because CSR is usually perceived as socially desirable by diverse

stakeholders (Freeman, 1984; Masulis & Reza, 2015). In fact, CEOs can create a favorable public

image for themselves and elevate their social status in the corporate elite community by engaging in

CSR (Hayward, Rindova, & Pollock, 2004). Because of their strong need for continuous social

TANG ET AL.1371