Commitment to innovation and the ability to analyze risk are a rare combination among CEO profiles, according to a new survey conducted by professors at Kennesaw State University in Georgia, USA.
Professors Prachi Gala and Saim Kashmiri analyzed financial and other information on 213 companies on the “Forbes 500” list, from 2014 to 2017. With that set in hand, they determined the level of integrity of the leaders by analyzing the annual letters sent to shareholders for keywords.
The scholars scored CEOs who used few of these causation words in their letters as having a high level of integrity. The analysis found that CEOs who scored the highest in terms of integrity also scored the lowest on our measures of innovation, proactiveness and risk-taking – traits often associated with entrepreneurial behavior.
“Having a lot of integrity has traditionally been considered one of the most important qualities of a business leader. Research has shown that a high level of CEO integrity is a key trait in determining employee loyalty as well as preventing problems like fraud.”
The study concludes that companies led by managers who take more risks, act proactively, are innovative, and are more likely to outperform the competition because they are agile in finding market opportunities. The authors highlight that the paper is not suggesting that organizations avoid hiring leaders with high levels of integrity. In fact, research has shown that integrity is a predictor of good leadership and fundamental to fostering commitment and loyalty among employees, Professor Gala says.
“However, corporate boards are duty-bound to choose chief executives who will increase shareholder value. So they should be aware of these tendencies and help their high-integrity CEOs counterbalance the negatives, such as by offering more incentive-based compensation and establishing processes and structures that stimulate innovation.”, she concludes.
Source: Emerald Insight | The Conversation