Last modified: 2017-06-18
Abstract
Research aims: This study aims to shed light on the role of pay schemes and individual factor (i.e. long-term orientation) play in influencing managers’ ethical judgments on corporate social responsibility (CSR) overinvestment. Built on an egocentric concept, this study predicts that managers employed under different pay schemes and with different levels of long-term orientation will make different ethical judgments on CSR overinvestment.
Design/Methodology/Approach: This is an experimental research with 99 students participating as subjects. In this study, the pay scheme variable was manipulated into two types, i.e. an overinvestment-inducing pay scheme and an overinvestment-hindering pay scheme. In measuring manager’s long-term orientation, this study adopts Bearden et al.’s (2006) measurement.
Research findings: This study finds evidence that managers with an overinvestment-hindering pay scheme are more likely to consider overinvestment in CSR as more unethical than those employed under an overinvestment-inducing pay scheme. This study also finds that managers who have a higher long-term orientation are more likely to judge overinvestment in CSR as unethical. Those results provide an understanding that economic incentives and individual factors influence managers’ ethical judgments. The results imply that pay schemes and managers’ individual factor are imperative for managers’ investment decisions and ethical judgments.